Are a nonprofit medical association's journal subscriptions, self-study learning materials, and membership dues subject to Texas sales tax?

Plain-English summary

The Texas Comptroller ruled that a nonprofit medical professional association doesn't owe sales tax on its peer-reviewed scientific journal, its self-study exam-prep materials, or its annual membership dues.

The taxpayer is a 501(c)(3) nonprofit for physicians and medical students that sells three things: a subscription to its peer-reviewed scientific journal, a "Learning System" of self-assessment study materials for internal medicine certification (available in print, digital, or a combined format), and annual membership.

Journal — exempt as a nonprofit scientific publication. Texas generally taxes magazines, journals, and similar publications (print or electronic) as tangible personal property, but specifically exempts periodicals and writings published and distributed by a religious, philanthropic, charitable, historical, scientific, or similar nonprofit organization. A peer-reviewed scientific journal published by this 501(c)(3) medical nonprofit fits squarely within that exemption.

Learning System — exempt for the same reason. Even though study guides and self-assessment materials are normally taxable tangible personal property (print or digital doesn't matter), all three formats of this Learning System are also "writings published and distributed" by the same qualifying nonprofit, so the same § 151.312 exemption covers them too.

Membership dues — not a taxable service. Only specifically listed services are taxable in Texas, and "information services" are one of them — but information "derived from laboratory, medical, or exploratory testing or experimentation or any similar method of direct scientific observation" is carved back out as nontaxable. The membership package bundles evidence-based clinical guidelines and a point-of-care decision tool (both nontaxable medical/scientific information), the exempt journal, and other non-listed benefits like advocacy-group access and networking — none of which triggers tax, so the whole membership fee stays untaxed.

What this means for you

Nonprofit professional and scientific associations

If your 501(c)(3) or similar nonprofit publishes a journal, newsletter, or study materials tied to your scientific or educational mission, § 151.312 likely exempts those sales from Texas sales tax regardless of print or digital format — the exemption follows the publisher's nonprofit status and purpose, not the delivery medium.

Organizations bundling clinical/scientific data services into membership

If your membership dues bundle together medically/scientifically-derived reference content (protected by the Rule 3.342(a)(5)(B) exclusion) with other non-enumerated benefits (networking, advocacy access, discounts), the whole bundle can stay untaxed — the key is that none of the individual pieces is itself an enumerated taxable service.

Accountants and tax professionals for nonprofits

Section 151.312's "religious, philanthropic, charitable, historical, scientific, or other similar organization" list is broader than it first appears — it swept in a medical professional association here. Cross-reference with the Rule 3.342(a)(5)(B) scientific-observation carve-out whenever a nonprofit's information products are at issue, since the two exemptions often work together.

Common questions

Q: Are digital/online publications treated differently from print for this exemption?
A: No. Texas law says the sale or use of a taxable item in electronic form doesn't change its tax status, and § 151.312's nonprofit-publication exemption applies the same way regardless of format.

Q: Does membership in a professional association automatically avoid sales tax?
A: Not automatically — it depends on what the dues buy. Here, the dues bundled nontaxable scientific/medical information and an exempt publication with other non-listed benefits, so nothing in the bundle was a taxable enumerated service. A different bundle including a taxable service could come out differently.

Q: What kind of information counts as exempt "direct scientific observation" information?
A: Under Rule 3.342(a)(5)(B), information primarily derived from laboratory, medical, or exploratory testing/experimentation, or similar direct scientific observation of physical phenomena — here, evidence-based clinical guidelines and a point-of-care clinical decision tool qualified.

Q: Can I rely on this ruling for my own nonprofit's publications or dues structure?
A: Only if you're the taxpayer it was issued to. It binds the Comptroller solely as to that taxpayer's specific products and facts and can't be relied on by others, though it illustrates how broadly § 151.312 and the scientific-information exclusion can apply.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051 (Sales Tax Imposed)
• Tex. Tax Code § 151.009 (Tangible Personal Property)
• Tex. Tax Code § 151.010 (Taxable Item — electronic form doesn't change tax status)
• Tex. Tax Code § 151.312 (Periodicals and Writings of Religious, Philanthropic, Charitable, Historical, Scientific, and Similar Organizations)
• Tex. Tax Code § 151.0038 (Information Service — definition)
• Tex. Tax Code § 151.0101(a)(10) (Taxable Services — information services)
• 34 Tex. Admin. Code § 3.342(a)(5)(B) (nontaxable direct-scientific-observation information)
• 34 Tex. Admin. Code § 3.342(a)(6) (taxable compiled/maintained information services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/202302009L

Original ruling text

February 14, 2023

RE: Private Letter Ruling No. 20210520141748

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters. [ENDNOTE 1] We are responding to your request dated May 17, 2021 and the additional information provided by email on June 29, 2021. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

** (Taxpayer) requested guidance on the taxability of membership dues to an association for medical students and professionals, a peer reviewed scientific journal, and a medical knowledge learning system provided in print and digital formats.

Facts Presented

The relevant facts are based on those provided in Taxpayer’s private letter ruling request, Taxpayer’s Articles of Incorporation, its Membership Application, and its website, last accessed on Nov. 21, 2022.

Taxpayer is a non-profit organization under Internal Revenue Code, Section 501(c)(3). Taxpayer’s Articles of Incorporation state, in part, that the organization’s “objects and purposes for which this corporation are formed are: …to promote the advancement of the science and practice of medicine, to further the study and knowledge of biological medicine among its members, to elevate the standard of preliminary education of physicians and a standard of medical education…” Taxpayer is accredited by the Accreditation Council for Continuing Medical Education (ACCME) to provide continuing medical education (CME) for physicians.

Taxpayer’s members are physicians practicing in general internal medicine and related subspecialties including cardiology, gastroenterology, nephrology, endocrinology, hematology, rheumatology, neurology, pulmonary disease, oncology, infectious diseases, allergy and immunology, and geriatrics. Members also consist of residents and fellows-in-training, medical students, academia and individuals interested in medicine.

Taxpayer sells three things: 1) a subscription to ** (Journal), a peer-reviewed, scientific journal published by Taxpayer, 2) The ** learning system (Learning System) designed to evaluate an individual’s knowledge of internal medicine and its subspecialties, and 3) membership in its organization for medical professionals and students.

Journal Subscription

Taxpayer publishes a peer-reviewed, scientific and scholarly journal related to the field of internal medicine and its sub-specialties. Articles included in the Journal include original research, review articles, practice guidelines, and commentary discussing topics such as clinical practice, health care delivery, public health, health care policy, medical education, ethics, and research methodology. CME credits may be earned for reading certain articles and submitting appropriate documentation.

The Journal is sold on an annual subscription basis and is provided in both print and online editions. Access to the Journal is also included with membership in Taxpayer’s professional organization.

Learning System

Taxpayer’s Learning System is designed to evaluate an individual’s knowledge of internal medicine and its subspecialties. It is specifically intended for physicians who provide personal, nonsurgical care to adults.

The Learning System is available in three formats: 1) Print, 2) Digital, and 3) Complete. The Print format is a printed version consisting of eleven sections focusing on high value care and hospitalist-specific content. This format includes approximately 1,200 self-assessment questions.

The Digital format grants users access to digital study aids through an online portal. It includes a digital format of the Print format text, additional self-assessment questions, access to custom quizzes, and practice tests for the American Board of Internal Medicine (ABIM) Certification Exam.

The Complete format includes all the features of both the Print and Digital formats. It also includes a print or e-book study guide for the ABIM exam, access to digital flashcards used to reinforce learning concepts, and access to an online self-assessment with over 400 questions.

All formats allow users to earn CME credits through the ACCME. The system’s Digital and Complete formats may be accessed through Taxpayer’s mobile applications.

Membership Dues

Annual membership dues are based on a member’s status as a medical student, a graduate of a medical school not yet enrolled or matched in a residency or fellowship, a current resident or fellow-in-training, a physician post training, or a non-physician healthcare professional.

Annual membership dues include:

Subscription to Taxpayer’s Journal;

Access to clinical guidelines and recommendations including:

Clinical practice guidelines;

Clinical guidance statements;

Best practice advice; and

Practice points;

Access to the DynaMed online evidence-based clinical decision tool (Online Decision Tool) used at the point-of-care;

Contact with Taxpayer’s state and national advocacy groups;

Access to a global network of colleagues;

Discounts on Taxpayer’s all-inclusive Learning System designed to evaluate an individual’s knowledge of internal medicine; and

Discounts on continuing education courses for CME credits.

Along with the Journal, membership includes access to a variety of clinical guidelines and recommendations. Clinical practice guidelines address the screening, diagnosis, and treatment of diseases based on a systematic review of available evidence. Clinical guidance statements add a review and methodological critique of existing and sometimes conflicting guidelines. Best practice advice papers are developed to address the value of diagnostic tests and therapeutic interventions for various diseases. Practice points provide advice to improve the health of individuals and populations and promote high value care based on the best available evidence derived from assessment of scientific work including guidelines, systemic reviews, and individual studies.

The Online Decision Tool offers medical professionals reference and diagnosis information at the point-of-care. This online resource offers comprehensive specialty content, clinical summaries and overviews, evidence-based recommendations, and drug content information including dosing and interactions.

Membership includes contact with Taxpayer’s state and national advocacy group to help members promote their policy interests and access to a global network of colleagues which allows members to connect in person and online. Members also receive discounts on continuing education courses for CME credits and discounts on Taxpayer’s Learning System.

Questions, Rulings, and Analysis

Our restatements of your questions are shown below, followed by our responses and analysis.

Question One: Is the subscription to Taxpayer’s Journal subject to sales and use tax?

Ruling One: The subscription to Taxpayer’s Journal is exempt from sales and use tax.

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state. Section 151.051 (Sales Tax Imposed). “Taxable items” include tangible personal property and taxable services. Section 151.010 (Taxable Item). Section 151.009 (Tangible Personal Property) defines tangible personal property as personal property that can be seen, weighed, measured, felt, or touched or that is perceptible to the senses in any other manner.

Section 151.010 states the sale or use of a taxable item in electronic form does not alter the item's tax status. Books, magazines, journals, and similar publications, either in a printed or an electronic format, are generally taxable as tangible personal property. Sections 151.009, .010, and .051. However, periodicals and writings published and distributed by a religious, philanthropic, charitable, historical, scientific, or other similar organization not operated for profit are exempt from Texas sales and use tax. Section 151.312 (Periodicals and Writings of Religious, Philanthropic, Charitable, Historical, Scientific, and Similar Organizations).

Taxpayer is a non-profit professional health care organization that publishes a peer reviewed, scientific journal. The journal is a writing published by an exempt organization as described by Section 151.312. Therefore, the subscription to Taxpayer’s journal is exempt from Texas sales and use tax.

Question Two: Is the sale of Taxpayer’s Learning System subject to sales and use tax?

Ruling Two: The sale of the Learning System is exempt from sales and use tax.

Analysis: The Print format of the system is printed material. Printed materials, including books; study guides; and other learning materials, are tangible personal property. See Section 151.009. The Digital format allows electronic access to the Print format through an online portal and includes additional quizzes and practice tests. The Complete format includes the features of the Print and Digital formats and includes an additional study guide, digital flashcards, and additional self-assessment questions.

As noted in the Analysis for Ruling One, Section 151.010 states the sale or use of a taxable item in electronic form does not alter the item's tax status. The Digital and Complete formats provide the Print version in an electronic form. They also provide additional study guides and learning materials in an electronic form. These materials are considered tangible personal property in the same manner as books and learning materials provided in a physical form. Therefore, the sale of the Learning System, in each format is a taxable sale of tangible personal property unless an exemption applies.

All three formats of the Learning System are writings published and distributed by a religious, philanthropic, charitable, historical, scientific, or other similar organization not operated for profit which are exempt under Section 151.312. Therefore, Taxpayer's sales of the Learning System are exempt from Texas sales and use tax.

Question Three: Are Taxpayer’s annual membership dues subject to sales and use tax?

Ruling Three: Taxpayer’s annual membership dues are not taxable.

Analysis: Only specifically enumerated services are taxable. See Sections 151.010, .0101. Information services are taxable services. Section 151.0101(a)(10). An information service is “furnishing general or specialized news or other current information.” Section 151.0038 (Information Service). Rule 3.342(a)(6) (Information Services) 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.” However, the sale of information primarily derived from laboratory, medical, or exploratory testing or experimentation or any similar method of direct scientific observation of physical phenomena is not subject to tax. Rule 3.342(a)(5)(B).

Taxpayer’s evidence-based clinical guidelines, policies, and recommendations provide members information related to the screening, diagnosis, and treatment of diseases, information on the value of diagnostic tests and therapeutic interventions, and advice to improve the health of individuals and populations. The Online Decision Tool provides members reference and diagnosis information at the point of care.

The clinical guidelines and Online Decision Tool provide information derived from medical testing and experimentation and from scientific observation as described by Rule 3.342(a)(5)(B). This information is a nontaxable information service. Additionally, Taxpayer’s membership includes other items that would not be taxable if provided on a stand-alone basis. For example, the subscription to Taxpayer’s Journal is exempt from Texas sales and use tax as discussed in Ruling One. Providing access to advocacy groups and a network of colleagues is also not a taxable service listed under Section 151.0101.

Membership in Taxpayer’s organization provides access to nontaxable information services and other nontaxable items. The annual membership dues are not subject to Texas sales and use tax.

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 No. 2021052014178.

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.