Are subscription fees for an online training platform — downloadable prerecorded video courses plus interactive software tools — taxable in Utah, or are they nontaxable educational services?
Plain-English summary
A company runs an online professional-training platform. For a monthly or annual subscription, users get a big library of downloadable prerecorded video courses plus interactive software tools — skill assessments, guided learning paths, an interactive coding sandbox, course-specific discussion boards, and some phone/email support. The company argued it sells nontaxable educational services (the modern version of the in-person classes it used to teach), so subscriptions shouldn't be taxed.
The Utah State Tax Commission disagreed: the subscription fees are subject to Utah sales and use tax when the user is located in Utah. Two independent reasons, either of which is enough:
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The downloadable videos are "products transferred electronically." Utah taxes a sale of a product transferred electronically (§ 59-12-103(1)(m)) — and that holds "regardless of whether the sale provides a right of permanent use" or just a time-limited subscription right. The fact that the videos can be downloaded (not merely streamed) is what makes them a product transferred electronically; the Commission flagged that pure stream-only video could come out differently.
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The interactive tools are "prewritten computer software," which Utah treats as tangible personal property. Prewritten software (§ 59-12-102(98)) is TPP under § 59-12-102(130), so granting the right to use it is a taxable sale/lease/use under § 59-12-103(1)(a), (1)(k), and (1)(l).
To decide whether the customer was really buying services or digital products/software, the Commission applied Utah's "essence of the transaction" test (from B.J.-Titan Services v. State Tax Comm'n, 842 P.2d 822 (Utah 1992)): you look at the primary object of the deal and ask whether the services are merely incidental to the property, or vice versa. Here the essence was the use of the downloadable videos and software; the human touches (limited phone support, lightly-moderated discussion boards where the company disclaimed responsibility) were incidental. A buyer's goal of learning doesn't convert a digital-product sale into a service. It also wasn't a tax-saving "bundled transaction" (§ 59-12-102(19)) because the benefits weren't shown to be distinct and separately priced.
The Commission distinguished genuinely live, in-person instruction, which is a nontaxable service in Utah (consistent with its earlier PLR 17-003), and granted prospective enforcement — collection began 30 days after the ruling — because the company had relied on earlier written guidance from the Taxpayer Services Division that the subscriptions were nontaxable.
What this means for you
Online course, e-learning, and content-subscription businesses
If your Utah customers can download your videos, audio, articles, or other content — even temporarily, even on a subscription that expires — Utah likely taxes the receipts as products transferred electronically. Branding it "education," "training," or "professional development" does not exempt it. The most load-bearing fact here was downloadability: a strictly stream-only, no-download product may be analyzed differently, so how your platform actually delivers content matters as much as what it contains.
SaaS and interactive-software platforms
Utah classifies prewritten (off-the-shelf) software as tangible personal property, and charging for the right to use it — even hosted, with no copy handed over — is taxable, sourced to the customer's address (§ 59-12-211(12)). Layering software tools on top of digital content (assessments, dashboards, coding sandboxes) gives the state a second independent hook for tax, not a path to exemption.
Accountants and multistate digital sellers
This is a clean application of the essence-of-the-transaction test: incidental human support won't reclassify a digital-product/software sale as a nontaxable service. Two cross-state contrasts worth filing:
- Minnesota has a specific webinar/interactivity exemption (Minn. Stat. § 297A.67 subd. 33); Utah has none, so the "but students can interact" argument that wins in Minnesota fails in Utah.
- Colorado reaches digital goods too but excludes electronically delivered software from tax (Colo. § 39-26-102(15)(c)) — the opposite of Utah, which taxes prewritten software as TPP regardless of delivery. Same SaaS-plus-content product, different answers in CO vs UT — run it state by state.
Common questions
Q: We sell online courses. Aren't educational services tax-exempt?
A: Not automatically in Utah. If the essence of the sale is the right to use downloadable prerecorded content and/or prewritten software, it's taxable under § 59-12-103(1)(m) and (1)(a) even though the purpose is learning. Educational services aren't a listed taxable service, but a digital-product sale dressed as a service is still taxed.
Q: Does it matter that our videos stream and aren't kept permanently?
A: Permanence doesn't save you — § 59-12-103(1)(m) taxes the sale whether the right is permanent or for a limited subscription term. But downloadability mattered a lot: the Commission stressed that the videos were downloadable, and noted stream-only video could be analyzed differently.
Q: What about the live classes we still teach in person?
A: Genuinely live, in-person instruction is a nontaxable service in Utah. The Commission drew exactly that line — live education isn't taxed, downloadable prerecorded education is.
Q: We bundle support and community with the content. Does that make it a service?
A: Not here. Under the essence-of-the-transaction test the limited phone support and discussion boards were incidental to the use of the videos and software. It also wasn't a "bundled transaction" because the pieces weren't distinct and separately priced.
Q: Can I rely on this ruling for my platform?
A: Not as binding. A Utah private letter ruling binds the Commission only for the taxpayer and facts it was issued to; its weight for anyone else depends on how closely the facts match — and the Commission expressly warned that other online courses, with more real personal instruction, could come out differently.
Citations and references
Statutes (Utah Code Ann.):
- § 59-12-103(1)(m) — tax on a sale of a product transferred electronically (permanent or limited-term)
- § 59-12-103(1)(a), (1)(k), (1)(l) — tax on retail sales, leases/rentals, and use of tangible personal property in Utah
- § 59-12-102(100) — definition of "product transferred electronically"
- § 59-12-102(98) — definition of "prewritten computer software"
- § 59-12-102(130) — prewritten computer software is tangible personal property
- § 59-12-102(19) — definition of "bundled transaction" (and its true-object exclusion)
- § 59-12-211(12) — sourcing of software use (no copy transferred) to the purchaser's address
Case law:
- B.J.-Titan Services v. State Tax Comm'n, 842 P.2d 822 (Utah 1992) — essence-of-the-transaction test
Rule: Utah Admin. Code R861-1A-34 (private letter ruling procedure and appeal rights)
Related Utah rulings cited: PLR 17-003 (downloadable continuing-ed taxable; live education not), PLR 16-005 (downloadable movies/e-books/music taxable), PLR 11-006 and 07-006/07-013 (true services, distinguished)
Source
- Landing page: Utah State Tax Commission — Private Letter Rulings
- Original PDF: 19-003.pdf
Original ruling text
FINAL PRIVATE LETTER RULING
RESPONSE LETTER
May 20, 2021
COMPANY
c/o NAME-1
ADDRESS
CITY, UT #####
Dear NAME-1:
This letter is in response to your request for a private letter ruling for COMPANY
(“Company”) concerning the Company’s sales of a product or service involving use of the
Company’s platform containing downloadable prerecorded educational video courses. You have
asked the following question: “Are the Company’s receipts for providing subscription access to
its online TRAINING platform subject to or exempt from sales tax?” This private letter ruling
concludes that the Company’s receipts are subject to Utah sales and use taxes when the
purchasers/users are located in Utah. This private letter ruling includes the following sections:
I. Facts, II. Issue, III. Applicable Law, IV. Analysis, and V. Conclusion.
I. Facts
This Facts Section includes facts from the following: A. your request letter, B. the
Company’s website, and C. the Company’s Terms of Use agreement.
A. Facts from your letter requesting the private letter ruling.
The following are facts quoted from your request letter:
b. The Company Engages in Providing Professional Education Services
The Company has been engaged in business since YEAR. The Company initially
provided nontaxable on-site professional TRAINING by sending instructors around
the country to provide classroom-based instruction. Today, the Company is
principally engaged in providing an online professional TRAINING platform. The
primary value driver of the platform is the library of TRAINING courses that the
Company has developed through its network of authors, which is comprised of
experts in various TRAINING disciplines. These “courses ” are not standalone
videos but are comprised of interactive services outlined below in conjunction with
various cloud-based skill assessment, course recommendation, and analytical tools
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that make up the virtual classroom that helps customers ensure they are gaining
targeted and personalized knowledge through the Company’s educational process.
The mission of the Company is to democratize (X) skills by making (X) learning
available and affordable to anyone with access to the Internet. To accomplish this
goal, the Company has moved entirely to online professional TRAINING primarily
focused in the fields of information (X), (Y), and (Z). The Company has created
an online education process that allows students to learn according to their specific
needs and desires as well as connect with course authors/instructors and other
students around the world. The students who use the Company’s TRAINING
platform are able to enhance existing, or obtain entirely new, (X) skills enabling
them to improve their careers and productivity.
The Company holds itself out to the public and in marketing materials as “The (X)
learning platform” with courses taught by the best industry experts. To provide a
high‐quality educational experience to learners, the Company contracts with
subject matter experts (“authors”) who create pre-recorded training courses on their
topic or (X) of expertise. The courses all come with access to a course-specific
discussion board, which allows the learner to interact with the course instructor and
other learners.
Through acquisition, creation via the author network and internal course
development, the course library includes over ##### on-demand and online courses
across a range of (X) subject areas and skill levels. New educational courses are
added daily, so content is always broadening and maintaining pace with changes in
(X). Educational courses are organized by modules and subject excerpts are
searchable, so users can either take an entire course or target an area for a specific
need. The pre-recorded training course content is similar to the curriculum
previously offered through in-person instruction by the Company and other training
providers. The majority of the Company’s courses are transcribed, and once
transcribed, are available with closed captioning in over 100 languages.
The Company’s customers can be divided into two groups: individual and business.
The company sells directly to individual customers through its website. On the
business side, the company’s sales team targets the skills development leader in all
industries, including (X) based companies, government agencies, and educational
institutions.
The largest competitor to the Company is the live-classroom professional
TRAINING industry.
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c. Several of the Courses Provided by the Company Prepare Learners to
Obtain Certifications, Professional Education Units, and Professional
Development Units
Several of the courses offered by the Company help prepare learners for active
certifications issued by various (X) industry organizations. For example, the
Company is a Platinum Partner with CERTIFICATION COMPANY, a (X)
industry trade association which offers a number of certificate programs for (X)
professionals. As a Platinum Partner, the Company gets early access to certification
objectives so that it can specifically design its educational content around exam
objectives and the specific knowledge required to obtain a CERTIFICATION
COMPANY certification.
Some courses provide continuing education units (“CEUs”) or Professional
Development Units (“PDUs”) for the learners who complete the courses. The
Company has partnered with the following professional certification providers in
order to provide CEUs for their customers: REMOVED NAMES OF
CERTIFICATION COMPANIES.
Learners Do Not Obtain Any Intellectual Property Rights Associated with the
Courses
Visitors to the Company’s website are able to browse the course library, review
subscription options and access other free information including a sampling of free
courses, tutorials, and (X) blog articles.
In exchange for monthly or annual subscription fees, a learner is granted a
temporary license to access the Company’s Site, which includes the complete
course library, interactive features and other online analytical services provided by
the Company. Learners may take as many courses, or individual modules of the
courses, as they wish during the subscription period. The Company retains 100%
of the intellectual property rights related to these courses, and learners are
prohibited from retaining, storing or redistributing any of the training materials
accessed via their subscriptions.
Learners can access the online courses via any device that can connect to the
Internet via an Internet browser or that can access the appropriate viewing app.
During their subscription period, learners can also download content for certain
training courses, including exercise files, course slides, and sample code. Also, if
desired, learners can download a free viewer that enables them to temporarily
download and view training videos offline during the subscription period. Once the
subscription period ends, the Customer’s access to the learning content is
terminated and they must renew their subscription in order to regain access to the
educational material again.
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d. Each Course Has an Interactive Discussion Board Where Learners Can
Communicate With the Author(s) and Other Learners
The Company’s courses are no longer presented in-person to customers; however,
the content remains much the same as that previously offered in-person and is
similar to what the Company’s competitors still offer in-person. Each course
available online has a discussion board on which questions and comments can be
presented to the course author and to other course viewers. Popular courses have
very active discussion boards. Although it varies by author and course, authors
often respond quickly, sometimes within minutes or hours, of receiving a question,
and in general, they play an active role on the discussion boards. An author’s
participation in the discussion boards can help generate additional interest in, and
viewership of, his or her courses, thereby increasing the author’s viewership
payments.[1]
e. In Addition to the Interactive Discussion Boards There Are Several Other
Benefits Provided on the Company’s Learning Platform
The following benefits are included with all subscriptions:
1. Skills Assessments: Skill assessments inform learners of their current level
of mastery of a particular topic and help identify a correct starting point,
and suggested learning paths, for their training. Skill assessments measure
a learner’s competency in any given topic or skill against all other learners
to properly assess whether or not the learner has gained proficiency, or
requires additional learning and study, in order to achieve mastery of a given
subject matter. Skills Assessments use machine learning and advanced
algorithms to measure a user’s skills, benchmark that user against others in
the industry, and discover opportunities for growth. Users are provided
with a numerical assessment of proficiency in various (X) languages and
fields such as Angular JS, C# and Java.
2. Guided Learning Paths: Guided learning paths identify courses needed to
learn the necessary competencies and can be accessed by learners to guide
their study of a particular topic or (X). Guided Learning Paths are based on
the Skills Assessments and a user’s goals—guiding users through a curated
set of courses designed to help them master their desired subject and avoid
spending time reviewing content that they already know.
3. One-on-One Phone Support: Learners can call in and speak with the
Company’s support team or professional services team and get guidance as
to which courses they should take based on their desire to learn a specific
skillset. The Company uses its years of experience as a professional (X)
learning company to properly assist customers in selecting the correct
course(s) to take based on their unique learning requirements and desires.
4. Optional Learning Check: Most courses include an optional learning check
to test the user’s retention of the material.
1
Your website at WEBSITE states the following about viewership payments: QUOTE DELETED.
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5. Learning Profiles: A learner’s profile tracks training course progress and
other learning and usage statistics. In addition, course completion
certificates can also be printed from the Customer’s history page. Course
completion certificates, along with the skill assessment printout, can be used
by a learner when applying for a promotion or new job to showcase that
they have the necessary relevant skillset required by the employer.
6. Interactive Coding Platform: Some courses allow the participant to access
an interactive coding platform that allows the viewer to code along with the
instructor and that gives feedback on how well the viewer is performing
each task.
f. Course Subscriptions Options
As mentioned above, the Company serves two main customer groups: individual
and business (including government and educational institutions) customers. Three
subscription single-price tiers are offered, which are outlined below. Business
pricing is often negotiated from the list pricing based on the number of learners a
customer is enrolling.
i. Individual Plans (Single Learner)
Plans targeting individual customers, which have monthly or annual billing options
include access to the entire course library, except coding challenge courses, access
to course-specific discussion boards, skill assessments, guided learning paths
suggested by the recommendation engine, channels that allow a user to create his
or her own learning paths, course learning checks, course completion certificates,
mobile and TV apps, and email and phone support services. The premium personal
subscription includes all items in the base plan plus access to all coding challenge
courses and certification practice exams.
ii. Professional Plan for Business, Government, and Educational Institution
Teams (Multiple Learner)
Professional business plans include all of the premium personal subscription
services, basic skill analytics[2] that allow business customers to evaluate their
teams and identify skills gaps, basic channel analytics that provide insight into
completion rates and employee engagement, certification practice exams, trend and
usage analytics, and team management capabilities.
iii. Enterprise Plan for Business, Government, and Educational Institution
Organizations (Multiple Learner)
2
[Your footnote 1, found your request letter for this private letter ruling:] Business Analytics, which
are analytics tools that enable business customers to evaluate the technical abilities of their teams, align learning
and map learning paths to meet key business objectives, determine the level of learning engagement, examine
trends in skill development, and quantify the impact of the personalized learning solution on their teams’ skills.
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Enterprise business plans include all premium personal and professional business
services and also include more advanced skill and channel analytics, single sign on
services, application program interface (“API”) access, and data export capabilities.
The pre-recorded videos are one element of the learning process and are not
available for purchase as hard copy/DVD courses or without the course discussion
functionality and the other various learning tools described above. The Company
only offers the educational course subscriptions outlined above. The Company
service offering is effectively an interactive platform not unlike a virtual classroom
for people to learn, understand their current skill levels and find the most efficient
path to improving those skills or to learning entirely new skills for use in their
personal and professional lives.
B. Facts from the Company’s website.
The Company’s website provides more information about the course-specific discussion
boards. A webpage titled “What are discussion boards?” located at WEBSITE
REMOVED, states the following:
DISCUSSION BOARDS PARAGRAPHS REMOVED
The how-to video titled “Helpful learning tools,” available at WEBSITE, explains that if a
user would like to participate in discussions with other Company users about the course, the user
can access a discussion tab, which provides the user with space to type a question about the course
or related topics. Based on the “Helpful learning tools,” the discussion boards connect users
together. In this how-to video, the Company does not describe the discussion boards as connecting
users with course authors.
The Company’s website also provides more information about the interactive coding
platform. According to the how-to video titled “Interactive Courses,” available at WEBSITE
REMOVED, a user watches a video and then completes a coding challenge in the browser and
receives feedback. The Company does not describe the feedback as coming from a person
analyzing and responding to that particular user’s coding project.
C. Facts from the Company’s Terms of Use.
Under the Company’s Terms of Use, a purchaser/user receives use of and access to the
Company’s website in exchange for money. Subsection 4(a) states that a purchaser’s/users “use
of and access to the Site is expressly conditioned upon timely payment of the applicable License
Fee . . .” (emphasis added). Subsection 4.1(a) states, “If you choose or purchase a [Company]
individual subscription plan during Checkout . . ., [the Company] grants you, and you alone, a non-
exclusive, non-transferable license . . . to use the Site for the subscription term length . . .”
(emphasis added). Subsection 4.2(a) states, “If you choose or purchase a [Company] business
subscription plan during Checkout . . ., [the Company] grants you a non-exclusive, non-
transferable license . . . to use the Site for the subscription term length . . .” (emphasis added). For
business subscription plans, Subsection 4.2(b) continues, “The Business License allows a specific
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number of your employees or affiliate employees to register as [Company] users . . . and receive
access to the Site by way of your Business License” (emphasis added). For a Company
Partnership Plan, Subsection 4.4 provides, “As a Company Partnership Plan user, you
acknowledge and agree that your use of and access to the Site is subject to . . . these Terms of
Use . . .” (emphasis added). Subsection 12(a) states the following:
THE SITE IS PROVIDED ON AN “AS IS” AND “AS AVAILABLE” BASIS,
WITHOUT WARRANTY OF ANY KIND, WHETHER EXPRESSED OR
IMPLIED. NEITHER [THE COMPANY] NOR ANY PERSON OR ENTITY
ASSOCIATED WITH [THE COMPANY] MAKES ANY PROMISE,
WARRANTY, OR REPRESENTATION WITH RESPECT TO THE
COMPLETENESS, SECURITY, RELIABILITY, QUALITY, ACCURACY OR
AVAILABILITY OF THE SITE. WITHOUT LIMITING THE FOREGOING,
NEITHER [THE COMPANY] NOR ANY PERSON OR ENTITY ASSOCIATED
WITH [THE COMPANY] PROMISES, REPRESENTS OR WARRANTS THAT
THE SITE OR CONTENT OBTAINED THROUGH THE SITE OR ANY
PORTION THEREOF WILL BE ACCURATE, RELIABLE, ERROR-FREE OR
UNINTERRUPTED, THAT DEFECTS WILL BE CORRECTED, THAT THE
SITE OR THE SERVER THAT MAKES THEM AVAILABLE ARE FREE
OF VIRUSES OR OTHER HARMFUL COMPONENTS, OR THAT THE SITE
OR ITS CONTENT OR MATERIALS WILL OTHERWISE MEET YOUR
NEEDS OR EXPECTATIONS. [THE COMPANY] HEREBY DISCLAIMS ALL
WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING BUT NOT LIMITED TO ANY
WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT, AND
FITNESS FOR PARTICULAR PURPOSE.
(Emphasis added.) Subsection 15(h) provides the following:
These Terms of Use, our Privacy Policy, the Mobile Terms, together with each
Sales Order, and/or the Professional Services Terms, as applicable, constitute the
sole and entire agreement between you and [the Company] with respect to the Site
and supersede all prior and contemporaneous understandings, agreements,
representations and warranties, both written and oral, with respect to the Site. . . .
(Emphasis added.)
The Terms of Use provides what is available for use and access. For a Company
Partnership Plan, Subsection 4.4 provides, “The scope and features of the Site content and
materials available to you, the length of your Company Partnership Plan, and the license fee . . .
will be set out during Checkout . . .” (emphasis added). Section (5)(a) explains the following about
use of the Company’s proprietary materials:
Use of [Company’s] Proprietary Materials. The Site contains copyrighted
materials, trademarks, proprietary and confidential information, and intellectual
property of [Company] and licensors of [“Company’] (collectively, “Proprietary
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Materials”), including without limitation source code, video, text, software,
photos, graphics, images, music, and sound. You agree not to modify, publish,
transmit, participate in the transfer or sale of, create derivative works of, or in any
way exploit, in whole or in part, any Proprietary Materials. Proprietary Materials
may only be accessed through the Site, and not by or from any other site or means.
The applicable License granted you by these Terms of Use is a right of access
through the Site only, and does not grant to you any right to download or store any
Proprietary Materials in any medium, other than (i) that downloadable content that
may be provided for certain training courses, including exercise files, course
slides, and sample code, (ii) files that are automatically cached by your web
browser for display purposes, and (iii) if we provide desktop, mobile, or other
applications for download, a single copy of such application for your computer
or mobile device solely for your own, personal use, provided you agree to be bound
by an applicable end user license agreement for such application (collectively, the
“Authorized Downloadable Materials”). Authorized Downloadable Materials are
held by you pursuant to a limited revocable right only, and are subject to all
restrictions described herein, including the prohibition on further transfer, sale,
creation of derivative works, or exploitation in any manner.
(Emphasis changed.) The content and materials include video, images, and written content, one
copy of which the purchaser/user may download during the term of the subscription for the user’s
personal use. The nature of the content and materials is also seen in Section 8 and Subsection 8(b),
which states the following:
You acknowledge and agree that the Site contains content and materials that are
viewable through online streaming methods and they are not to be downloaded
by you (or your Business Users), except under the limited circumstances and
for the limited times as permitted by your Plan.”
....
You acknowledge and agree that you (and your Business Users), will not:
• reproduce, redistribute, transmit, assign, sell, broadcast, rent, share, lend, modify,
adapt, edit, create derivative works of, license, capture, download, save, upload,
print, or otherwise transfer or retain information or content available on the Site
other than with regard to Authorized Downloadable Materials, subject to the
limited permissions set forth herein;
• manually or systematically harvest, scrape, collect or otherwise extract
information or data contained on the Site, other than permitted use of Authorized
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Downloadable Materials or temporary storage of video materials for offline
viewing (if permitted by your Plan).
....
(Emphasis changed.)
The Company’s Terms of Use, Section 7 User Content and Feedback, provides more
information about the Interactive Discussion Boards discussed in your request letter and in other
information available on the Company’s website. Subsection 7 states the following in part:
(a) Interactive Features. The Site from time to time may provide you with
the ability to upload, post, submit, publish, or transmit to other users or persons
(hereinafter, “post”) via online forums, chat capabilities, user discussion groups,
blogs, online profiles, or other online forums (“Interactive Features”).
(b) User Content. The Interactive Features are intended to provide you and
other users with valuable resources on selected topics. Some, if not most, of the
content found on such Interactive Features is provided by third-party users,
and not us (such content, “User Content”). The third-party user (including you,
if applicable) is solely responsible for the User Content and for complying with
applicable laws relating thereto.
(i) All User Content you submit to the Interactive Features (including for
inclusion on the Site) or that is otherwise made available to [the Company] will be
considered non-confidential and non-proprietary, and by so doing, you hereby grant
us and our affiliates and service providers, and each other and our respective
licensees, successors, and assigns the right to use, reproduce, modify, perform,
display, distribute, and otherwise disclose to third parties any such material.
....
(c) Feedback. We welcome and encourage you to provide feedback,
comments, and suggestions for improvements to the Site (“Feedback”). You
acknowledge and agree that any and all Feedback provided by way of the Site or
otherwise will be the sole and exclusive property of [the Company] . . . .
(d) Monitoring and Enforcement. We have the right to:
(i) remove or refuse to post any User Content or Feedback for any or no
reason in our sole discretion;
....
Notwithstanding anything to the contrary, we have no obligation to review any
User Content, Feedback, or materials before they are posted on the Site, and
we cannot ensure prompt removal of objectionable material after it has been posted.
Accordingly, we assume no liability for any action or inaction regarding
transmissions, communications, or content provided by any user or third
party, and we have no liability or responsibility to anyone for performance or
nonperformance of the activities described in this Section.
(Emphasis changed.) According to the Terms of Use, the Interactive Features are the use of the
software tools allowing for communications between the purchaser/user and “other users or
persons.” The Company is taking no responsibility for those communications. The Company has
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“no liability or responsibility to anyone for performance or nonperformance of the activities
described [in Section 7 User Content and Feedback].” See also Subsection 9(d) (“We are not
responsible or liable to you . . . for the content or accuracy of any materials provided by any third
parties.”). After considering the above Terms of Use, the Company is not selling to
purchasers/users the right to communicate with the course authors.
II. Issue
The issue for this private letter ruling is whether the Company’s receipts for providing
subscription access to its online TRAINING platform are subject to Utah sales and use taxes. This
private letter ruling concludes that these receipts are subject to Utah sales and use taxes when the
purchasers/users are located in Utah. The analysis for this conclusion is located in the IV. Analysis
Section of this ruling.
III. Applicable Law
Utah Code Annotated § 59-12-103(1) imposes sales and use taxes on certain transactions,
stating the following in part:
A tax is imposed on the purchaser . . . on the purchase price or sales price for
amounts paid or charged for the following transactions:
(a) retail sales of tangible personal property made within the state;
....
(k) amounts paid or charged for leases or rentals of tangible personal property if
within this state the tangible personal property is:
(i) stored;
(ii) used; or
(iii) otherwise consumed;
(l) amounts paid or charged for tangible personal property if within this state the
tangible personal property is:
(i) stored;
(ii) used; or
(iii) consumed; and
(m) amounts paid or charged for a sale:
(i) (A) of a product transferred electronically; . . .
....
(ii) regardless of whether the sale provides:
(A) a right of permanent use of the product; or
(B) a right to use the product that is less than a permanent use, including
a right:
(I) for a definite or specified length of time; and
(II) that terminates upon the occurrence of a condition.
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Utah Code Ann. § 59-12-102 defines various terms, stating the following in part:
As used in this chapter:
....
(19) (a) "Bundled transaction" means the sale of two or more items of tangible
personal property, products, or services if the tangible personal property,
products, or services are:
(i) distinct and identifiable; and
(ii) sold for one nonitemized price.
(b) "Bundled transaction" does not include:
....
(iv) the retail sale of tangible personal property and a service if:
(A) the tangible personal property:
(I) is essential to the use of the service; and
(II) is provided exclusively in connection with the service; and
(B) the service is the true object of the transaction;
....
(27) "Computer" means an electronic device that accepts information:
(a) (i) in digital form; or
(ii) in a form similar to digital form; and
(b) manipulates that information for a result based on a sequence of
instructions.
(28) "Computer software" means a set of coded instructions designed to cause:
(a) a computer to perform a task; or
(b) automatic data processing equipment to perform a task.
....
(98) (a) . . . . "prewritten computer software" means computer software that is not
designed and developed:
(i) by the author or other creator of the computer software; and
(ii) to the specifications of a specific purchaser.
....
(100) (a) Except as provided in Subsection (100)(b), "product transferred
electronically" means a product transferred electronically that would be
subject to a tax under this chapter if that product was transferred in a
manner other than electronically.
(b) "Product transferred electronically" does not include:
(i) an ancillary service;
(ii) computer software; or
(iii) a telecommunications service.
....
(104) (a) "Purchase price" and "sales price" mean the total amount of consideration:
(i) valued in money; and
(ii) for which tangible personal property, a product transferred
electronically, or services are:
(A) sold;
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(B) leased; or
(C) rented.
....
(113) "Retail sale" or "sale at retail" means a sale, lease, or rental for a purpose
other than:
(a) resale;
(b) sublease; or
(c) subrent.
....
(115)(a) "Sale" means any transfer of title, exchange, or barter, conditional or
otherwise, in any manner, of tangible personal property or any other
taxable transaction under Subsection 59-12-103(1), for consideration.
(b) "Sale" includes:
....
(v) any transaction under which right to possession, operation, or use of
any article of tangible personal property is granted under a lease or
contract and the transfer of possession would be taxable if an outright
sale were made.
....
(130) . . . .
(b) "Tangible personal property" includes:
....
(v) prewritten computer software, regardless of the manner in which the
prewritten computer software is transferred.
....
Utah Code Ann. § 59-12-211(3) provides the location of sales that involve the purchasers’
receipt of tangible personal property, a product transferred electronically, or a service, with
Subsection § 59-12-211(3) stating the following:
Subject to Subsection (10), and except as provided in Subsections (7), (8), (9), (11),
and (14), if tangible personal property, a product transferred electronically, or a
service that is subject to taxation under this chapter is not received by a purchaser
at a business location of a seller, the location of the transaction is the location
where the purchaser takes receipt of the tangible personal property or service.
(Emphasis added.) Utah Code Ann. § 59-12-211(12) provides the location of sales that involve
the purchasers’ use of software when there is not a transfer of a copy of the software, with
§ 59-12-211(12) stating the following:
(a) Notwithstanding any other provision of this section and except as provided in
Subsection (12)(b), if a purchaser uses computer software and there is not
a transfer of a copy of that software to the purchaser, the location of the
transaction is determined in accordance with Subsections (4) and (5).
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(b) If a purchaser uses computer software described in Subsection (12)(a) at more
than one location, the location of the transaction shall be determined in
accordance with rules made by the commission in accordance with Title 63G,
Chapter 3, Utah Administrative Rulemaking Act.
(Emphasis added.) When § 59-12-211(12) applies, Subsections (4) and (5) of Utah Code Ann.
§ 59-12-211 generally locate transactions at an address for the purchaser.3
IV. Analysis
This Analysis Section includes the following subsections:
A. Summary of Analysis Section's conclusions
B. A bundled transaction analysis does not apply to the Company’s sales of
subscriptions because the information presented does not show that the
subscription’s benefits are distinct and identifiable.
C. Depending on the essence of the transaction analysis, the Company’s sales of the
subscriptions could potentially be taxable as sales of products transferred
electronically and/or as sales of tangible personal property.
D. The essence of the transaction of the Company’s sales of subscriptions is the sale
of the right to use the downloadable prerecorded videos and to use the related
software tools; thus, the sales of the subscriptions are subject to Utah sales and use
taxes when the transactions are located within this State.
E. This private letter ruling’s conclusion that the Company’s sales of subscriptions are
taxable is consistent with the conclusions of PLR 17-003, which involved sales of
downloadable continuing educational resources.
F. The STATE-1 Department of Revenue’s guidance does not conflict with the
conclusions of this private letter ruling.
G. PLR 11-006 is factually distinguishable from, and does not apply to, this
PLR 19-003.
H. PLR 07-013 is factually distinguishable from, and does not apply to, this
PLR 19-003.
I. Prospective enforcement is appropriate for the Company’s situation to the extent
3
For more direction on the application of § 59-12-211 to the situation you have presented, you may contact
the Taxpayer Services Division, Technical Research Unit, by phone at 801-297-7705, by email at
[email protected], or by mail at 210 N 1950 W, Salt Lake City, UT 84134.
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described in this subsection.
The analysis for this private letter ruling is provided below.
A. Summary of Analysis Section’s conclusions
The Company’s sales of subscriptions granting access to its online TRAINING platform
are subject to Utah sales and use taxes when the purchasers/users are located in Utah. The
subscriptions provide online access both to a library of downloadable prerecorded video courses
and to interactive prewritten software. Based on the downloadable prerecorded video courses, the
subscription fees are taxable under § 59-12-103(1)(m) as “amounts paid or charged for a sale . . .
of a product transferred electronically.”4 Additionally, based on the interactive prewritten
software, the subscription fees are also taxable under § 59-12-103(1)(a), (k), and (l) as “amounts
paid or charged for . . . retail sales of tangible personal property made within the state . . .” (under
Subsection (1)(a)); as “amounts paid or charged for leases or rentals of tangible personal property
if within this state the tangible personal property is . . . used . . . or . . . otherwise consumed” (under
Subsection (1)(k)); and as “amounts paid or charged for tangible personal property if within this
state the tangible personal property is . . . used . . . or . . . consumed . . .” (under Subsection (1)(l)).
After analyzing the facts presented, the essence of the transaction between the Company and the
purchasers/users is the sale of the use of the Company’s downloadable prerecorded videos and the
use of the Company’s prewritten computer software; the essence is not the sale of personal services
provided by the Company’s personnel to the purchasers/users.
B. A bundled transaction analysis does not apply to the Company’s sales of
subscriptions because the information presented does not show that the
subscription’s benefits are distinct and identifiable.
Subsection 59-12-102(19)(a) defines “bundled transaction” as “the sale of two or more
items of tangible personal property, products, or services if the tangible personal property,
products, or services are: (i) distinct and identifiable; and (ii) sold for one nonitemized price.”
Your request letter does not explain how the subscription benefits are distinct and identifiable.
Instead, your request letter asserts that the benefits are part of one product, with that product being
nontaxable educational services.5
C. Depending on the essence of the transaction analysis, the Company’s sales of
the subscriptions could potentially be taxable as sales of products transferred
electronically and/or as sales of tangible personal property.
4
The fact that the prerecorded videos are downloadable is important to the finding that prerecorded video
courses are products transferred electronically.
5
The sales of educational services involving tangible personal property may be excluded from the definition
of “bundled transaction” by § 59-12-102(19)(b)(iv) and would not be subject to sales taxes if the educational services
are the object of the transaction. Subsection 59-12-102(19)(b)(iv) excludes from the definition of bundled transaction
certain “sales of tangible personal property and a service if . . . the service is the true object of the transaction.” Sales
of educational services are not among the transactions listed in § 59-12-103 as being subject to tax. You have asserted
that the Company sells educational services; however, this private letter ruling concludes otherwise.
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Under § 59-12-102(100), a “‘product transferred electronically’ means a product
transferred electronically that would be subject to a tax under this chapter if that product was
transferred in a manner other than electronically.” All subscriptions you presented involve a
library of downloadable prerecorded videos, accessible through the Company’s website as long as
the purchasers/users have active subscriptions. The downloadable nature of the videos means that
the videos can be electronically transferred to the purchasers/users; which is a requirement for the
videos to be a “product transferred electronically.”6 Transactions involving products transferred
electronically are subject to Utah sales and use taxes under § 59-12-103(1)(m), as “amounts paid
or charged for a sale . . . of a product transferred electronically; . . . regardless of whether the sale
provides . . . a right to use the product that is less than a permanent use, including a right . . . for a
definite or specified length of time . . .” Thus, if the sales of subscriptions are essentially sales of
the right to use the downloadable prerecorded videos, the sales of subscriptions would be taxable
under § 59-12-103(1)(m).
Under § 59-12-102(28), “[c]omputer software means a set of coded instructions designed
to cause . . . a computer to perform a task” (internal quotes omitted). All subscriptions you
presented involve software tools accessed and used by purchasers/users through the Company’s
website. Under § 59-12-102(98)(a), “prewritten computer software means computer software that
is not designed and developed . . . by the . . . creator of the computer software . . . to the
specifications of a specific purchaser” (internal quotes omitted). The software tools that the
purchasers/users access and use through the Company’s website are not designed and developed
by the Company to the specifications of a specific purchaser/user. Thus, the software tools are
prewritten computer software. Under § 59-12-102(130)(b)(v), prewritten computer software is
tangible personal property. Transactions involving tangible personal property are subject to Utah
sales and use taxes under the following subsections:
Section 59-12-103(1)(a), for “retail sales of tangible personal property made within the
state”
Section 59-12-103(1)(k), for “amounts paid or charged for leases or rentals of tangible
personal property if within this state the tangible personal property is . . . used . . . or
. . . otherwise consumed”
Section 59-12-103(1)(l), for “amounts paid or charged for tangible personal property if
within this state the tangible personal property is . . . used . . . or . . . consumed . . .”
For purposes of § 59-12-103(1)(a), (k), and (l), § 59-12-102(115)(b)(v) broadly defines “sale” to
include “any transaction under which right to . . . use of any article of tangible personal property
is granted under a lease or contract and the transfer of possession would be taxable if an outright
sale were made” (emphasis added). Thus, if the sales of the subscriptions are essentially sales of
6
If the videos had been viewable but not downloadable or otherwise electronically transferable to the
purchasers/users, the analysis of this private letter ruling would have been different. The differing treatments of
downloadable videos and of non-downloadable videos that are only viewed online can be seen in PLR 16-005.
Redacted copies of PLR 16-005 and other private letter rulings are available through the tax.utah.gov website. Further
discussion of downloadable educational resources versus live educational resources is included in Subsection IV.E.
of this private letter ruling.
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the right to use the software tools on the Company’s website, the sales would be taxable under
§ 59-12-103(1)(a), as retail sales of tangible personal property if the sales are “made within the
state.”7 Alternatively, those sales could also be taxable under § 59-12-103(1)(k) and (1)(l) if the
purchasers/users are using or consuming the Company’s software tools within this state.
Subsection 59-12-211(12) addresses whether certain transactions involving software are made
within this state, with § 59-12-211(12)(a) stating the following:
[I]f a purchaser uses computer software and there is not a transfer of a copy of that
software to the purchaser, the location of the transaction is [the address for the
purchaser].
Thus, if the sales of the subscriptions are sales of the use of software tools, then the sales are
subject to Utah sales and use taxes if the purchasers/users are located in Utah.
D. The essence of the transaction of the Company’s sales of subscriptions is the
sale of the right to use the downloadable prerecorded videos and to use the
related software tools; thus, the sales of the subscriptions are subject to Utah
sales and use taxes when the transactions are located within this State.
This Subsection IV. D. includes the following subsections:
1. Utah Supreme Court’s guidance on the essence of the transaction analysis.
2. Nature and extent of the personal services provided by the Company’s personnel.
3. Nature and extent of the use of the Company’s downloadable prerecorded videos
and related software tools.
4. The essence of the transaction is the sale of the use of the downloadable prerecorded
videos and related software tools.
The analysis of Subsection IV. D. is explained below.
1. Utah Supreme Court’s guidance on the essence of the transaction analysis.
To determine whether the Company’s sales of subscriptions are sales of personal services
of the Company’s personnel or, alternatively, sales of the right to use the downloadable
prerecorded videos and the related software tools, one must consider the essence of, or primary
object of, the transaction. The Utah Supreme Court has explained the essence of the transaction
as follows:
[T]he essence of the transaction theory[] focuses on the nature of what was sold
and whether it primarily entails tangible personal property. . . . This theory
7
Under § 59-12-102(113), a “‘[r]etail sale’ . . . means a sale, lease, or rental for a purpose other than: (a) resale;
(b) sublease; or (c) subrent.” This private letter ruling analyzes the Company’s sales of subscriptions as retail sales.
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examines the transaction as a whole to determine whether the essence of the
transaction is one for services or for tangible personal property. The analysis
typically requires a determination either that the services provided are merely
incidental to an essentially personal property transaction or that the property
provided is merely incidental to an essentially service transaction. . . .
B.J.-Titan Services v. State Tax Comm’n, 842 P.2d 822, 825 (Utah 1992) (internal citations
removed). To decide whether the essence of the transaction for the Company’s sales is the personal
services provided by the Company’s personnel or, alternatively, the use of the downloadable
prerecorded videos and/or the related software tools, one must consider the nature and extent of
(1) the personal services provided by the Company’s personnel and (2) the use of the downloadable
prerecorded videos and related software tools.
2. Nature and extent of the personal services provided by the Company’s
personnel.
The Company’s personnel provide purchasers/users with one-on-one phone support and
email communications. Through these communications, the Company’s personnel advise users
on the courses the users should take. The Company’s personnel also provide limited personal
services for the course-specific discussion boards; if a user posts a question on a course-specific
discussion board and does not get a response, then the user may email the Company and the
Company’s personnel will follow up and try to expedite an answer to the user’s question or
concern. Additionally, the Company’s personnel may monitor the content on discussion boards
and may remove or refuse to post any message, according to the Company’s Terms of Use.
Overall, the Company’s services for the discussion boards are very limited. Under the Company’s
Terms of Use, the Company takes no responsibility for the content posted on those discussion
boards.
The authors’ interactions on the discussion boards have not been shown to be among the
personal services provided by the Company’s personnel. You explained that the authors often take
an active role on the discussion boards because these activities help them generate additional
interest in their training courses, which can increase the authors’ viewership payments. The
Company pays the authors the viewership payments to compensate the authors for the video
courses. The limited information provided about the viewership payments does not show the
Company is also paying the authors to directly interact with individual purchasers/users on the
Company’s behalf. No information suggests that the Company requires authors to participate in
any way with individual users/purchasers, based on the Company’s Terms of Use.
The services of the Company’s sales personnel are not personal services provided to
purchasers/users in exchange for the subscription fees. Instead, the Company’s sales personnel
interact with the skills development leaders of potential customers to generate sales for the
Company.
The services of the Company’s personnel to develop the Company’s library of
downloadable prerecorded videos and related software tools are not personal services provided to
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individual purchasers/users. Instead, these services develop and enhance the value of the product
sold for the subscription fees. These services of the personnel include the following:
contracting with the authors who create the pre-recorded training video courses
providing the software tools that allows users to engage in skill assessments and in
communications with other users
acquiring courses
creating courses internally
making the Company’s library of video courses searchable
transcribing videos and adding closed captioning
partnering with (X) industry organizations, then designing courses that help users
obtain certain certifications
partnering with professional certification providers, then designing courses that provide
users with continuing education units for certain certificates
In the past, the personal services of the Company’s personnel included sending instructors
to customers’ locations to provide classroom-based instruction. However, the Company’s
personnel are no longer providing these personal services. As discussed above, the personal
services of the Company’s personnel provided directly to users are much more limited now.
3. Nature and extent of the use of the Company’s downloadable prerecorded
videos and related software tools.
You explained that “the Company is principally engaged in providing an online
professional TRAINING platform.” Through this platform, purchasers/users learn or enhance
their skills by using the downloadable prerecorded video courses and related software tools. The
software tools include various cloud-based skill assessments, course recommendations, and
analytical tools. The Company acquires or creates the prerecorded videos that are integral to the
downloadable prerecorded video courses. The Company’s course library includes over ##### on-
demand and online courses, with new courses added daily. The courses are organized by module
and are searchable. Through the Company’s website, users can browse the Company’s course
library. A subscription allows users to have a temporary license to access the Company’s website,
which includes the course library, interactive features, and other online analytical features. The
Company retains the intellectual property rights related to the courses and users may only
temporarily download video and other content for offline viewing during the subscription period.
Users have access to the content only while their subscriptions are active. A subscription provides
software-based benefits that include skill assessments, guided learning paths, optional learning
checks, and an interactive coding platform. The interactive coding platform appears to involve
software that provides users with computer generated feedback when the users complete coding
challenges in a browser. No information provided in the request letter or in other documents
suggests an instructor is personally analyzing and responding to an individual user’s coding
project. The Company’s Terms of Use explain that purchasers/users receive use of and access to
the Company’s website in exchange for the subscription fee. The Terms of Use provide the limits
of the purchasers’/users’ use of the Company’s website, including the use of the Company’s
videos, texts, software, etc., which content is accessible through the Company’s website.
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4. The essence of the transaction is the sale of the use of the downloadable
prerecorded videos and related software tools.
After reviewing the facts relating to the nature and extent of the personal services provided
by the Company’s personnel to individual purchasers/users and the facts relating to the nature and
extent of the use of the downloadable prerecorded videos and use of the related software tools, the
essence of the transaction of the sales of subscriptions is for the use of the downloadable
prerecorded videos and the use of the related software tools. The essence is not for the personal
services of the Company’s personnel. The Company’s personnel provide only limited personal
services directly to users, and these are counseling services that focus on the downloadable
prerecorded videos and related software tools. The other services of the Company’s personnel are
not specific to individual users, and instead, are those services are primarily related to developing
the Company’s library of downloadable prerecorded video courses and related software tools, the
use of which the Company sells through its subscriptions.
Because the essence of the transaction is the use of the downloadable prerecorded videos
and the use of the related software tools, the sales are subject to Utah sales and use taxes under
§ 59-12-103(1)(m), as sales of products transferred electronically for the downloadable videos,
and under § 59-12-103(1)(a), (1)(k), and (1)(l) for the sales of the use of the software tools when
the transactions are made “within the state,” in accordance with § 59-12-211(12). A
purchaser’s/user’s objective of learning or education does not change this result.8
E. This private letter ruling’s conclusion that the Company’s sales of
subscriptions are taxable is consistent with the conclusions of PLR 17-003,
which involved sales of downloadable continuing educational resources.9
In PLR 17-003, the Commission addressed a company’s sales of downloadable online
continuing education resources and business education resources. Licensed professionals authored
the company’s continuing educational course materials, and the company’s online continuing
education was a library of blogs, downloadable articles, and recorded webinars. The Commission
concluded that the downloadable online educational resources were taxable, with PLR 17-003,
page 18, providing the following analysis:
7. If the Online Educational Resources that are Downloadable for Offline
Viewing Were Sold Separately, the Benefit Would be Taxable Under
§ 59-12-103(1)(m).
If the Company were to sell separately the online educational resources that
are downloadable for offline viewing, the Company would be selling products
transferred electronically, which transactions are subject to sales and use taxes, as
explained below.
8
The essence of the transaction analysis of this private letter ruling is based on the unique facts of this private
letter ruling. In recent years, the number and variety of educational courses offered online have grown. In general,
online courses involve various levels of personal services provided by companies’ personnel to their students. Thus,
the conclusions in this private letter ruling may not be the same as those for other online courses.
9
Redacted copies of PLR 17-003 and other private letter rulings are available through the tax.utah.gov
website.
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The online educational resources that are downloadable for offline viewing
meet the definition of product transferred electronically. Section 59-12-102(95)(a)
defines “product transferred electronically” as “a product transferred electronically
that would be subject to a tax under this chapter if that product was transferred in a
manner other than electronically.” Downloaded articles, audio recordings, and
audio-video recordings can meet this definition. If the articles, audio recordings,
and audio-video recordings were “transferred in a manner other than
electronically,” such as through CDs or DVDs, then the articles, audio recordings,
and audio-video recordings would be subject to Utah sales and use taxes if the
Customers are located in Utah.
The sales and/or uses in Utah of online educational resources that are
downloadable for offline viewing are subject to Utah sales and use taxes under
§ 59-12-103(1)(m), as “amounts paid or charged for a sale: (i) (A) of a product
transferred electronically . . .” Under § 59-12-103(1)(m)(ii), the sale of the online
educational resources that are downloadable for offline viewing remain taxable
“regardless of whether the sale provides: (A) a right of permanent use of the
product; or (B) a right to use the product that is less than a permanent use, including
a right: (I) for a definite or specified length of time; and (II) that terminates upon
the occurrence of a condition.”
In summary, if the Company’s articles, audio recordings, and audio-video
recordings are downloadable, the Company would be selling products transferred
electronically and these sales would be subject to Utah sales and use taxes if the
sales and/or uses are in Utah. Therefore, if the Company sold separately the online
educational resources that are downloadable for offline viewing, these sales would
be subject to Utah sales and use taxes if the sales and/or uses are in Utah.
The above analysis and conclusion are consistent with the analysis found in
PLR 16-005. PLR 16-005 involved the sale of memberships that provided multiple
membership benefits. The membership benefits in PLR 16-005 included a
“VIDEOS BENEFIT—downloading movies and TV shows,” an “E-BOOK
BENEFIT—downloading books,” and a “MUSIC BENEFIT—downloading
music.” PLR 16-005 concluded that these benefits are subject to Utah sales and
use taxes.
Consistent with PLR 17-003, this PLR 19-003 finds that the Company’s sales of the use of a library
of downloadable prerecorded video courses are subject to Utah sales and use taxes.
In PLR 17-003, the Commission also addressed a company’s sales of live education
resources. The Commission concluded that sales of live education resources were not taxable,
with PLR 17-003, page 17, providing the following analysis:
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5. If the In-person Educational Resources Were Sold Separately, the
Benefit Would Not be Taxable Under § 59-12-103(1).
Another membership benefit is the in-person educational resources. If the
Company were to sell the in-person educational resources separately, the Company
would be selling a service that is not subject to Utah sales and use taxes.
You explained, “In-person CONTINUING EDUCATION events are
typically three to four day conferences with featured speakers, workshops, and
panel discussions.” You also explained, “For . . . in-person . . . CONTINUING
EDUCATION courses, licensed PROFESSIONALS comprise the faculty who
author or present the materials.” These in-person educational services provided to
Members are not subject to Utah sales and use taxes because they are not a service
listed as taxable in § 59-12-103(1). However, the Company would be subject to
sales and use taxes on the tangible personal property, products transferred
electronically, or taxable services that the Company consumes in Utah in providing
these educational services.
PLR 17-003 shows how Utah treats live educational services differently from downloadable
prewritten/prerecorded educational resources. You have claimed that the Company’s
downloadable prerecorded video courses should not be taxable because they are like the live
trainings the Company previously provided. However, under Utah law, live education is unlike
downloadable prewritten/prerecorded educational resources. Both PLR 17-003 and this PLR
19-003 correctly conclude that the sales of downloadable prewritten/prerecorded educational
materials in Utah are taxable, while the sales of live education are not.
F. The STATE-1 Department of Revenue’s guidance does not conflict with the
conclusions of this private letter ruling.
STATE-1’s laws are different from Utah’s. STATE-1 has a webinar exemption; Utah does
not. STATE-1’s webinar exemption, found in M.S. § 297A.67 Subd. 33, states the following:
Presentations accessed as digital audio and audiovisual works. The charge for a
live or prerecorded presentation, such as a lecture, seminar, workshop, or course,
where participants access the presentation as a digital audio work or digital
audiovisual work, and are connected to the presentation via the Internet,
telecommunications equipment, or other device that transfers the presentation
electronically, is exempt if:
(1) participants and the presenter, during the time that participants access the
presentation, are able to give, receive, and discuss the presentation with each
other, although the amount of interaction and when in the presentation the
interaction occurs may be limited by the presenter; and
(2) for those presentations where participants are given the option to attend the
same presentation in person:
(i) any limitations on the amount of interaction and when it occurs during
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the presentation are the same for those participants accessing the
presentation electronically as those attending in person; and
(ii) the admission to the in-person presentation is not subject to tax under
this chapter.
(Emphasis added.) The STATE-1 Department of Revenue’s guidance focused on whether the
Company’s purchasers/users had the ability to interact in an educational course because that
ability is a requirement of STATE-1’s webinar exemption. Utah does not have an exemption
similar to STATE-1’s; the ability to interact in an educational course is not a requirement stated in
the Utah Code.
G. PLR 11-006 is factually distinguishable from, and does not apply to, this
PLR 19-003.
Both PLR 19-003 and PLR 11-006 include essence of the transaction analyses. However,
PLR 11-006 is factually different from PLR 19-003, which leads to the different conclusion that
the company in PLR 11-006 provided nontaxable services and the Company in this PLR 19-003
is providing taxable use of downloadable rerecorded videos and related software tools.
PLR 11-006 concluded that a client was purchasing the company’s unique research and
analysis services, which created the value of the report transferred to the client. The company’s
personnel provided personal services to each client to help them interpret the report. PLR 11-006
considered the nature and extent of the client’s use of the company’s software, and found that use
to be “very limited.” Id. at 12. The client used the software to provide the company with the data
to be analyzed and again used the software to receive back the final report from the company.
The situation of PLR 19-003 is very different from the situation of PLR 11-006. In this
PLR 19-003, the purchasers/users of the Company’s subscriptions have continuous use of the
Company’s downloadable prewritten video courses and related software tools for the duration of
the subscriptions. The purchasers’/users’ interactions with the Company’s downloadable
prewritten video courses and related software are extensive. The purchasers/users are acquiring
use of the videos and software tools through the website to learn certain subjects; they are not
acquiring use of the videos and software tools for the primary purpose of receiving reports. Based
on these factual differences, PLR 11-006 does not apply to PLR 19-003
H. PLR 07-013 is factually distinguishable from, and does not apply to, this
PLR 19-003.
Both PLR 19-003 and PLR 07-013 provided essence of the transaction analyses. However,
PLR 07-013 is factually different from PLR 19-003, which leads to the different conclusion that
the company in PLR 07-013 provided nontaxable services while the Company in this PLR 19-003
is providing use of downloadable prerecorded videos and related software tools.
In 07-013, the Commission found that the company sold a nontaxable backup service,
designed to protect a customer’s computer data, and the Commission did not find that the company
was selling use of its computer server space located in Utah. Also in PLR 07-006, no library of
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prewritten material was involved. Instead, the customers in PLR 07-006 were acquiring a service
to protect their own information rather than purchasing the use of the company’s downloadable
materials. The company provided its customers with use of the company’s prewritten computer
software at no charge to allow them to use the backup service. The software was merely incidental
to the service.
The situation of PLR 19-003 is very different from that of PLR 07-006. In this
PLR 19-003, purchasers/users of the Company’s subscriptions pay to use the Company’s content
of downloadable prerecorded video courses. PLR 07-006 did not involve the sale of use of
downloadable content. In PLR 19-003, purchasers/users of the Company’s subscriptions pay to
use the software tools relating to the downloadable video courses. In PLR 07-006, the use of the
software was not sold, it was provided free of charge; the software was incidental to the service
provided. Based on these factual differences, PLR 07-006 does not apply to PLR 19-003.
I. Prospective enforcement is appropriate for the Company’s situation to the
extent described in this subsection.
Based on the facts and circumstances of your unique situation, the Commission finds that
prospective enforcement of Utah sales and use tax collection is appropriate for the Company’s
sales of subscriptions. The Taxpayer Services Division provided the Company with written
guidance that the Company’s sales of subscriptions would not be subject to Utah sales and use
taxes. The Company voluntarily submitted its request for this private letter ruling on April 10,
2019, to verify the correctness of the Taxpayer Services Division’s guidance. Additionally, the
Company has been responsive throughout the process of preparing this private letter ruling,
causing no delay in the ruling’s issuance. The Company disclosed its name to the Commission
during the private letter ruling process only after the Commission asked so that the Commission
could better understand the facts of the Company’s situation. Our delay in our response to you
along with the complexity of your issue justify prospective enforcement. Thus, as of thirty (30)
days after the date of this private letter ruling, the Company is obligated to collect and remit Utah
sales and use taxes on the Company’s sales of subscriptions in accordance with the direction that
the Commission has provided in this private letter ruling.
Before thirty (30) days after the date of this private letter ruling, the Company might have
collected sales taxes on the Company’s sales of subscriptions. For these sales, the prospective
enforcement does not relieve the Company of its obligation to remit all Utah sales and use taxes
the Company has collected. Thus, for tax periods prior to thirty (30) days after the date of this
private letter ruling, the Company must still remit all collected taxes.
V. Conclusion
This private letter ruling concludes the following:
1. The Company’s receipts for providing subscription access to its online TRAINING
platform are subject to Utah sales and use taxes when the purchasers/users are located
in Utah.
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2. Prospective enforcement is appropriate for the Company’s situation to the extent
described in Subsection IV. I. of this private letter ruling.
The Tax Commission’s conclusions are based on the facts as you described them and the
Utah law currently in effect. Should the facts be different or if the law were to change, a different
conclusion may be warranted. If you feel we have misunderstood the facts as you have presented
them, you have additional facts that may be relevant, or you have any other questions, please feel
free to contact the Commission.
Additionally, you may also appeal the private letter ruling in the following two ways.
First, you may file a petition for declaratory order, which would serve to challenge
the Commission's interpretation of statutory language or authority under a statute. This petition
must be in written form, and submitted within thirty (30) days after the date of this private letter
ruling. You may submit your petition by any of the means given below. Failure to submit your
petition within the 30-day time frame could forfeit your appeal rights and will be deemed a
failure to exhaust your administrative remedies. Declaratory orders are discussed in Utah
Administrative Code R861-1A-34 C.2., available online
at http://tax.utah.gov/commission/effective/r861-01a-034.pdf, and in Utah Administrative Code
R861-1A-31, available online at http://tax.utah.gov/commission/effective/r861-01a-031.pdf.
Second, you may file a petition for redetermination of agency action if your private letter
ruling leads to an audit assessment, a denial of a claim, or some other agency action at a division
level. This petition must be written and may use form TC-738, available online
at http://tax.utah.gov/forms/current/tc-738.pdf. Your petition must be submitted by any of the
means given below, within thirty (30) days, generally, of the date of the notice of agency action
that describes the agency action you are challenging.
You may access general information about Tax Commission Appeals online
at http://tax.utah.gov/commission-office/appeals. You may file an appeal through any of the
means provided below:
• Best way—by email: [email protected]
• By mail: Tax Appeals
USTC
210 North 1950 West
Salt Lake City, UT 84134
• By fax: 801-297-3919
For the Commission,
Rebecca L. Rockwell
Commissioner
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RLR/aln
19-003
cc. NAME-2
COMPANY-2
EMAIL
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