New York Rules that Fees for Access to an Online Course Library are Not Subject to Sales Tax

December 14, 2020

Young student watching lesson online and studying from home. Young woman taking notes while looking at computer screen following professor doing math on video call. Latin girl student studying from home and watching teacher explaining math formula on video chat.

With the rise in online learning, businesses offering these products and services need to be aware that the features offered and the manner in which they are provided can impact the state sales tax treatment.

By: Kristen Mantilla, SALT Associate

Through technological advancements, and perhaps more recently for health reasons, online learning has become more popular and there is no shortage of providers offering content. However, when there is a change in how a service or property is provided, it is important to ask whether the new format requires the collection and remittance of sales tax. Recently, the New York Department of Taxation and Finance (New York) published an advisory opinion addressing whether subscriptions fees for access to an online course library were subject to sales tax.[1]

The taxpayer is an online learning company that teaches business, software, creative, and other personal and professional skills by offering access to its online video library with lessons taught by industry experts. The videos are pre-recorded and non-interactive files that can be watched on a web browser or on a free mobile device application. The video lessons do not provide immediate and supportive feedback, nor do they have embedded questions to engage the user.  For certain video courses, the user may be able to ask the instructor questions, but these are not answered in real time.  The user’s experience on a web browser and the app is largely the same, although the app does not allow for interactive questioning, learner assessment, or testing capabilities.

The taxpayer offers three different types of subscriptions. The first tier, “Basic Subscription,” includes unlimited access to the video library for one month. The second tier, “Premium-monthly,” provides unlimited access to the video library for one month as well as the ability to download project files, which are documents that include worksheets, practice problems and examples. The project files do not include functioning software. The highest tier, “Premium-Annual,” is the same as “Premium-monthly” except that access is for a year and the user is able to download the courses for viewing offline.

New York reviewed each of these subscriptions to determine whether the taxpayer was providing a taxable good/service. New York taxes the receipts from the sale of tangible personal property which includes prewritten software and certain services, including an information service.[2] An information service is defined as the “furnishing of information by printed, mimeographed or multigraphed matter or by duplicating written or printed matter in any other manner, including the services of collecting, compiling or analyzing information of any kind or nature and furnishing reports thereof to other persons.”[3]

New York concluded that the Basic Subscription was not taxable because (i) it only provided access to an online video library which does not constitute tangible personal property and (ii) its purpose is to impart knowledge by providing access to instructional course material that does not qualify as an information service.

The Premium-Monthly subscription also provided the customer with additional project files that the user could download. Since the files are not delivered in a tangible format, they are not tangible personal property. In addition, providing the files does not constitute an information service because they are provided only to supplement video courses and enhance the learning experience. Consequently, sales of the taxpayer’s Premium-Monthly subscription are not subject to sales tax.

Finally, the Premium-Annual subscription allows the user to download the videos to view offline, and New York determined that these downloads constitute the nontaxable sale of an intangible. Therefore, Premium-Annual subscriptions are also not subject to sales tax.

The specific manner that goods and services are provided can potentially alter the sales tax treatment.  For example, if the project files contained functioning software, perhaps New York would view the premium subscriptions as taxable because the user is downloading prewritten software. In addition, other states impose sales tax on digital goods and may therefore view all the subscriptions as taxable.[4]

Aprio’s SALT team has experience with multi-state sales and use taxes and can evaluate all aspects of your transactions in order to fully analyze the potential sales and use tax treatment. We ensure that you fully comply with your multi-state sales and use tax compliance obligations so that you do not incur unexpected tax liabilities and penalties. We constantly monitor these and other important state tax topics, and we will include any significant developments in future issues of the Aprio SALT Newsletter.

Contact Kristen Mantilla, SALT Associate at or Jeff Glickman, partner-in-charge of Aprio’s SALT practice, at for more information.

This article was featured in the November/December 2020 SALT Newsletter.

[1] New York Advisory Opinion TSB-A-20(18)S (June 16, 2020).

[2] N.Y. Tax Lax § 1105(a)

[3] N.Y. Tax Law § 1105(c)(1)

[4] For more information on this topic, please see our August 2020 SALT Newsletter, which contains an article addressing the Tennessee sales and use tax treatment of an online learning platform.

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About the Author

Jeff Glickman

Jeff Glickman is the partner-in-charge of Aprio, LLP’s State and Local Tax (SALT) practice. He has over 18 years of SALT consulting experience, advising domestic and international companies in all industries on minimizing their multistate liabilities and risks. He puts cash back into his clients’ businesses by identifying their eligibility for and assisting them in claiming various tax credits, including jobs/investment, retraining, and film/entertainment tax credits. Jeff also maintains a multistate administrative tax dispute and negotiations practice, including obtaining private letter rulings, preparing and negotiating voluntary disclosure agreements, pursuing refund claims, and assisting clients during audits.