Is a professional association's annual membership fee — bundling access to industry publications, networking events, certifications, and an online library — taxable in Texas?

Plain-English summary

A nonprofit professional association charges members $129 a year (plus a one-time $10 application fee) for a bundled membership. The membership includes access to an online library of the association's reference documents, magazines, and research journals — plus nontaxable perks like a personalized dashboard, networking event listings, and certification-status tracking. The association asked Texas whether the whole membership fee is taxable.

The Comptroller ruled yes, the entire fee is taxable. The key move is a two-step analysis: first, is any piece of what's bundled into the membership a taxable service on its own? Here, yes — the online library of industry publications, magazines, and research journals meets Texas's definition of a taxable "information service" (furnishing current, industry-specific information for consideration), the same way the Comptroller has treated similar subscription/membership content in past rulings.

Second, once a bundle contains even one taxable piece charged as a single lump sum with no itemized breakout, Texas's rule is that the whole charge becomes taxable — even though some of what's bundled (like networking events and profile customization) would be nontaxable if sold on its own. Because the association's $129 fee doesn't separately price the publications access from the networking/certification features, the entire fee — plus the $10 application fee, which rides along with it — is taxable, subject to the standard 20% exemption that applies to information services (so 80% of the total ends up subject to tax).

What this means for you

Professional associations, trade groups, and membership organizations

If your membership fee bundles any taxable content or service (like an online publications library, research database, or other information service) together with nontaxable perks, the whole fee is presumptively taxable in Texas unless you separately state a price for the nontaxable pieces on the invoice or in your pricing structure. A single "all-in" membership price is the riskiest structure from a tax standpoint.

Associations wanting to reduce taxable exposure

Separately itemizing charges — for example, pricing the publications/research-access component apart from event access, certification tracking, or job-board access — could let the nontaxable pieces stay nontaxable, though the association here didn't do this and so lost that benefit for its entire fee.

Accountants and tax professionals

This is a straightforward application of the "one taxable component taxes the whole lump-sum bundle" rule from Comptroller's Decision No. 103,588 (2012), paired with the information-service definition in Rule 3.342(a)(6). Watch for the same issue in any subscription, membership, or bundled-service pricing model — it recurs across many Texas ruling fact patterns.

Common questions

Q: Would itemizing the publications access separately from other perks change the outcome?
A: Potentially. The ruling turns on the fact that the taxable and nontaxable pieces were sold under one lump-sum charge with no basis for a breakout. A structure that separately prices the nontaxable services could keep those charges out of the tax base.

Q: Does the 20% information-service exemption apply here?
A: Yes — once a charge is taxable as an information service, Section 151.351 exempts 20% of the charge, so the association must collect and remit tax on 80% of the total membership and application fees.

Q: Does the association's nonprofit status affect the outcome?
A: No. The ruling notes the association is a 501(c)(1) nonprofit exempt from federal income tax and Texas franchise tax, but sales tax on taxable services is a separate question from income/franchise tax exemption — nonprofit status alone doesn't exempt a taxable sale.

Q: Does this ruling apply to my association's membership fees?
A: Not automatically. This is a private letter ruling binding only on the Comptroller as to this taxpayer's specific facts and membership structure. Associations with different bundled content or separately itemized pricing could reach a different result.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051, § 151.010 (sales tax imposition; taxable item)
• Tex. Tax Code § 151.0101(a) (taxable services, generally)
• Tex. Tax Code § 151.0038 (Information Service, definition)
• 34 Tex. Admin. Code § 3.342(a)(6) (Information Services)
• Tex. Tax Code § 151.351 (20% exemption for information/data processing services)
• Tex. Tax Code § 151.007 ("Sales Price" or "Receipts")
• STAR Accession Nos. 200304802L (Apr. 1, 2003), 200010759L (Oct. 3, 2000) (similar subscription/membership fees ruled taxable)
• Comptroller's Decision No. 39,572 (2004) (information service definition)
• Comptroller's Decision No. 103,588 (2012) (lump-sum bundling of taxable and nontaxable items)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/202105006L

Original ruling text

May 3, 2021

RE: Private Letter Ruling No. 20191022092023

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters. [ENDNOTE1] We are responding to your request dated Oct. 22, 2019, and Sept. 8, 2020. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on the taxability of the sale of memberships in a professional association for sales and use tax purposes.

Facts Presented

** (Taxpayer), is a professional association for Taxpayer’s industry based in Pennsylvania. Taxpayer is a nonprofit corporation exempt from federal income tax under Section 501(c)(1) of the Internal Revenue Code (IRC). Taxpayer is also exempt from Texas franchise tax.

Taxpayer sells individual memberships on an annual basis for a single, lump-sum fee of $129, plus a one-time $10 application fee for new members. Each membership includes access to a dashboard with a personalized profile and sections for events, certification status, and knowledge resources.

The personalized profile section includes customizable features that allow members to edit their profiles and update security, communication, and publication delivery preferences. The events section includes a personalized list of upcoming networking events and webinars, with registration status, and a history of completed events. It also provides a list of all available webinars and associated professional development units a member can earn to maintain certifications.

The certification status section provides information about available certifications and the status of the member’s current applications for certification. In addition, the e-learning link within this section allows members to view scheduled and completed training and generate transcripts.

The knowledge resource section provides members access to online training courses and documents and other purchased e-learning products. This section also provides a research function that returns results in four categories: (1) resources available to purchase through Taxpayer’s online store; (2) publications and papers; (3) how-to articles; and (4) tools and templates that include project plans, presentations and checklists. Certain resources are exclusive to members and are available to download. The dashboard also provides other functions such as the orders tab that show members’ history from Taxpayer’s store, including certifications.

Merchandise, events, certification applications, and testing fees are not included in the membership fee and must be purchased separately. These items and opportunities are not exclusive to members, but members receive a discount on these items. Additionally, members have access to job boards that are exclusive to Taxpayer’s industry.

Taxpayer’s website provided additional information regarding its memberships including a membership video accessed on Oct. 23, 2019. According to the video, each membership includes access to all current and back issues of: (1) a published standard reference document; (2) monthly magazines and publications that include latest developments about certifications, research, standards, education and training, and news from local chapters and communities; (3) research journals submitted by industry professionals; and (4) a connectivity platform that includes over 4,000 articles and blogs, discussion boards, other member profiles as well as a search tool to connect with other subject matter experts on presented webinars and articles.

Question, Ruling, and Analysis

Our restatement of your question is shown below, followed by our response and analysis.

Question: Are Taxpayer’s sales of memberships subject to Texas sales and use tax?

Ruling: Taxpayer’s membership fee is taxable as an information service, as defined in Section 151.0038 (“Information Service”) and Rule 3.342(a)(6) (Information Services). Taxpayer must collect sales tax on its lump-sum charge for membership and any other related charges, such as the one-time application fee. Twenty percent of the charge for a taxable information service is exempt. Section 151.351 (Information Services and Data Processing Services).

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state. Section 151.051 (Sales Tax Imposed). “Taxable item” includes tangible personal property and taxable services. Section 151.010 (Taxable Item). In addition, only specifically enumerated services are taxable in Texas. Section 151.0101(a) (“Taxable Services”).

Information services are one of the specifically enumerated taxable services. Section 151.0101(a)(10). An information service is defined as “furnishing general or specialized news or other current information.” Section 151.0038. Rule 3.342(a)(6) further defines taxable information services as “[i]nformation that is gathered, maintained, or compiled and made available by the provider of the information service to the public or to a specific segment of industry for a consideration.” See also Comptroller’s Decision No. 39,572 (2004).

Taxpayer’s membership includes access to an online library of industry reference documents, industry publications, and magazine subscriptions as well as access to a platform that includes articles and papers written by individuals in Taxpayer’s industry. The information provided in these writings is current information specific to Taxpayer’s industry and meets the definition of a taxable information service under Rule 3.342(a)(6). The Comptroller’s office has determined that similar charges for subscriptions or membership fees that provide access to information for consideration are taxable. See STAR Accession Nos. 200304802L (April 1, 2003) and 200010759L (Oct. 3, 2000).

Taxpayer’s membership also includes access to items that would not be taxable if provided on a stand-alone basis. For example, access to networking opportunities and webinars that are not provided in connection with the sale of a taxable item are not taxable.

However, these items are purchased under Taxpayer’s lump-sum charge and are not available apart from the membership. A lump-sum charge for taxable and nontaxable services is taxable. See Comptroller’s Decision No. 103,588 (2012) (“When an invoice includes charges for both taxable and nontaxable items with no basis for a breakout the entire charge is taxable.”).

Taxpayer must collect sales tax on the total amount received for their membership. The $10 application fee is imposed in connection with the $129 lump-sum membership fee and is considered part of the sales price of the taxable information service under Section 151.007 (“Sales Price” or “Receipts”). Twenty percent of the charge for a taxable information service is exempt from Texas sales and use tax. Section 151.351.

Accordingly, Taxpayer must collect and remit sales tax on 80 percent of the total amount received for its taxable information service.

Comptroller’s Decisions and STAR documents cited can be found on the Comptroller’s State Tax Automated Research (STAR) system. The Texas Tax Code, Texas Administrative Code, and the STAR system are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling 20191022092023.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE

1 Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.