Sales Taxation
By Benjamin A. Davidson originally appearing at https://www.taxnotes.com/tax-notes-today-state/online-sales-taxation/sales-taxation-online-education/2021/08/13/76wlg
The sales taxation of online education occurred almost by accident. As physical goods have transitioned to digital form, states have protected their tax base by taxing the sale of digital goods. Maryland has been the focus of significant attention for expanding its base to include digital services, but in the United States the application of a consumption tax to digital services remains the exception, not the rule. Distinguishing between a good and a service is not always easy though. With the overnight transition from in-person to online classrooms, educational services suddenly occupied the same digital space as the digital goods that had been targeted for taxation.
As the United States emerges from the COVID-19 pandemic, most educational services will return to the in-person classroom, but higher education is forever changed. This article examines how four states have navigated these challenges, and it identifies opportunities for future legislation and regulation.
I. A Definitional Dilemma
Before turning to the solution, it helps to review the problem. U.S. jurisdictions have traditionally applied sales tax to tangible personal property. Over time, books have transitioned from paper to e-readers, music has moved from tapes and discs to digital audio files, and movies have followed a similar path. The fact that digital goods are frequently licensed instead of sold in fee simple is not a problem — sales tax laws frequently address leases and licenses of property.1 The problem is the medium. The digitalization and electronic transfer of goods previously in tangible form has forced sales tax laws to evolve, lest the base erode. The Streamlined Sales Tax Governing Board, now with 23 full-member states and one associate member, amended the Streamlined Sales and Use Tax Agreement in 2007 to define digital products.2
SSUTA defines specified digital products as electronically transferred digital audiovisual works, digital audio works, and digital books.3 It defines a digital audiovisual work as “a series of related images which, when shown in succession, impart an impression of motion, together with accompanying sounds, if any.”4 This definition easily describes Hollywood blockbusters, corporate training videos, educational television series, and workout videos. However, it also describes prerecorded presentations eligible for continuing legal or professional education credits and prerecorded college instruction. Taken one step further, if a prerecorded lecture is a digital audiovisual work, a live online lecture may also meet this definition. Both appear on the screen as “a series of related images which, when shown in succession, impart an impression of motion, together with accompanying sounds, if any.” Viewers may be unaware of whether the lecture they are watching is live or prerecorded and may be surprised to learn that even “live” programs are often broadcast online with a 30-second delay.5
As a result of this definitional difficulty, statutes imposing sales tax on the sale or license of digital audiovisual works can be read to apply to some, if not all, online education, including online education offered by colleges and universities.6 Earlier this year, the Maryland comptroller interpreted the 21st-Century Economy Fairness Act7 as taxing all online education — live and prerecorded — until the Maryland General Assembly enacted a law8 exempting some online instruction.9 Also this year, the Iowa Department of Revenue issued a declaratory order finding that the sale of most learning plans by online provider Study.com were subject to sales tax, including plans offering transferable college credit.10 States have responded to this dilemma by introducing a variety of exclusions and exemptions to align their state statutes with their policy objectives.
II. Federal Limitations
One common thread that informs states’ responses is an effort to comply with the federal Internet Tax Freedom Act (ITFA). First enacted in 1998, the ITFA prohibits states from imposing discriminatory taxes on electronic commerce.11 A discriminatory tax includes any tax imposed on electronic commerce that “is not generally imposed and legally collectible by such State or such political subdivision on transactions involving similar property, goods, services, or information accomplished through other means.”12
In drafting statutes that comply with the ITFA, states must decide what forms of online education involve property, goods, or services that are similar to in-person instruction.13 Some states have determined that the ITFA protects all live online education from taxation unless its live in-person counterpart would also be subject to tax. Other states have determined that livestreaming is necessary for ITFA protection, but not sufficient.
III. State Legislation
This article reviews the approach that four states have taken to excluding or exempting the sale of online education.14 Three of the states — Washington, Wisconsin, and North Carolina — are members of SSUTA, whereas the fourth, Maryland, is not. Even among the SSUTA states there are notable differences. The states are presented in the approximate order of their legislative enactments or, in Wisconsin’s case, its litigation.
A. Washington
Washington state provides several definitional exclusions for the sale of online education. Washington taxes the sale of digital products, including digital goods and digital automated services.15 Digital goods include digital audiovisual works.16 Thus, absent an exclusion, online education might be taxed as either a digital good or a digital automated service. The State Legislature has addressed this by excluding some online education from both definitions.17
Regarding ITFA compliance, Washington law provides an exclusion for live presentations “where participants are connected to other participants via the internet or telecommunications equipment, which allows audience members and the presenter or instructor to give, receive, and discuss information with each other in real time.”18 This exclusion suggests a narrow reading of what constitutes a good or service that is similar to in-person presentations under the ITFA. The exclusion requires not only that the presentation be live, but also that the technology connecting the participants allow the participants to interact with each other and with the instructor. A livestreamed presentation whose technology does not allow for interaction is not excluded, and a prerecorded presentation is not excluded.19 Also, competency-based programs that provide automated rather than human interaction are not excluded.20
Washington offers a broader exclusion for some educational providers. It excludes all “online educational programs” provided by an elementary or secondary school and online educational programs provided by an institution of higher education when the programs are “encompassed within the institution’s accreditation.”21 Washington’s broad exclusion of “online educational programs” provided by schools reflects a deliberate policy decision to exclude some online education from taxation, regardless of whether it is required by the ITFA.22
B. Wisconsin
Wisconsin offers a different path to exempting some online education. Wisconsin’s exemption for ITFA compliance states only that a sale is exempt “if the sale of and the storage, use, or other consumption of such goods sold in a tangible form is exempt from, or not subject to, taxation.”23 For many years, the Wisconsin DOR interpreted this statute as exempting the sale of live educational seminars via webcast because the sale of live educational seminars, in tangible form, is not subject to tax.24 However, the DOR took the position that the tangible form of a prerecorded, on-demand educational seminar was a DVD, and because the sale of a DVD was not exempt from tax, the sale of prerecorded, on-demand educational seminars was not exempt either.25
The State Bar of Wisconsin, which offers a variety of online continuing education programs, including on-demand seminars, disagreed and petitioned the Wisconsin Tax Appeals Commission.26 The commission held that the sale of all the bar’s online programs — including live webinars — included digital audiovisual works. However, it held that live in-person seminars could not be the tangible form of the digital audiovisual work because the live in-person seminars were a service, and “services are by their very nature . . . ephemeral and intangible.”27 Absent an exempt tangible form, the commission held that none of the bar’s programs — not even the livestreamed programs — qualified for exemption under Wis. Stat. section 77.54(50).28 Instead, the commission found exemption under Wisconsin’s true objective test.
Wisconsin’s test originated as a common law doctrine, since codified at Wis. Admin. Code Tax section 11.67(1).29 Under the test, if the true objective of a purchaser is to purchase an exempt educational service, with the digital good being incidental to that true objective, then the sale is exempt.30 The commission examined the supreme court rules governing continuing legal education (CLE) credit and determined that “lawyers purchasing the On-Demand Seminars, in an overwhelming majority, are seeking, as their true objective, something more than just a succession of images transferred electronically.”31 The commission noted that even for on-demand seminars, attendees could submit questions to the instructor by email. Access to the instructors, along with compliance with other court rules, distinguished on-demand seminars — which were eligible for CLE credit — from self-study videos, which at the time were not eligible for CLE credit.32 The commission acknowledged that there was no definition in the tax code for an educational service, and declined to create one, but held that the on-demand seminars were an educational service, stating that “legitimate earned credit as determined by a branch of state government, is a strong indicator that there is an educational service and that obtaining the service is the true objective of the purchaser.”33
The Wisconsin DOR has since issued guidance reflecting the commission’s holding.34 The guidance treats the sale of live online education as a service, and although it does not cite the true objective test by name, it applies the test to allow some prerecorded online education to be treated as a service when the purchaser is receiving an educational service and the prerecorded webinar is transferred to the purchaser incidentally to the educational service. The guidance offers three disjunctive circumstances when this occurs:
When the participant is evaluated by an instructor. Like Washington’s regulation on automated interaction,35 the guidance specifies that evaluation by an interactive, automated method is insufficient.
The participants are connected to other participants and to presenters via technology that allows discussion of information by live interaction contemporaneous with the presentation. Although this bears a strong resemblance to Washington’s statute concerning live interaction, Washington paired the requirement of live interaction with a requirement that the educational presentation be livestreamed.36 The Wisconsin DOR’s guidance document allows that live interaction can suffice for exemption even if the educational presentation with which it is contemporaneous is prerecorded.
“The pre-recorded webinar is certified by a branch of government for the participant to receive continuing education credits to obtain or remain in good standing with their government-issued license.”37 This circumstance reflects the facts from State Bar of Wisconsin v. Wisconsin Department of Revenue.
C. North Carolina
Until recently, North Carolina’s exclusion for some online education was provided largely by administrative interpretation. North Carolina has imposed sales tax on the sale of digital property since 2010.38 It included in the definition of digital property only items that “would be taxable . . . if sold in a tangible medium.”39 In 2011 the North Carolina DOR issued a private letter ruling interpreting this statute not as hinging on the taxation of a hypothetical tangible corollary, but as requiring the existence of an actual, taxable, tangible corollary.40 In the ruling, the taxpayer sold access to an online repository of continuing education videos. Because the taxpayer did not sell the same videos in a tangible medium, the DOR held that sale of access to the online repository was not taxable.
The state General Assembly determined that “the outcome of this PLR was inconsistent with the plain meaning and intent of the statutory language,”41 and amended the statute in 2019 to remove the tangible medium phrase.42 Next, the legislature enacted an exemption for ITFA compliance, and several exclusions for online education.43
Regarding the ITFA, North Carolina exempts a sale “that consists of nontaxable service content when the electronic transfer of the digital audio work or digital audiovisual work occurs contemporaneously with the provision of the nontaxable service in real time.”44 North Carolina’s reference to nontaxable service content avoids the issue presented by State Bar of Wisconsin, concerning whether live in-person instruction was the tangible form of live online instruction. The reference also conditions the exemption on the service content’s being exempt.45
Regarding online education specifically, North Carolina excludes educational services from the definition of digital property.46 The state defines educational services as “the delivery of instruction or training, whether provided in real time, on demand, or at another set time, by or on behalf of a qualifying educational entity where at least one of four conditions applies.”47 North Carolina’s conditions resemble Washington’s and Wisconsin’s, but with subtle differences:
The instruction is encompassed within the institution’s accreditation, identical to Wash. Rev. Code section 82.04.192(3)(b)(ix). North Carolina exempts instruction that prepares an enrolled student for gainful employment in a recognized occupation, even if not encompassed within the institution’s accreditation.
The instruction is part of the curriculum for an enrolled student. This is largely coextensive with the previous condition but can also describe curricula that are outside an institution’s accreditation.
The participant is evaluated by an instructor; evaluation by an automated method is insufficient. This condition is like Example 14 in Wash. Admin. Code section 458-20-15503(303)(j) and Wisconsin Guidance Document 100274.
The participant is connected to the presenter via technology “allowing the participant to provide, receive, or discuss information through live interaction, contemporaneous with the presentation.” Unlike the Wisconsin guidance, North Carolina’s condition does not require that the participants be connected to each other — it requires only that they be connected to the presenter.
Lastly, North Carolina provides an exemption for the sale of digital audiovisual works that are qualifying educational expenses to the operator of a home school.48
D. Maryland
Maryland’s recent legislation on the taxation of digital goods and services has been the focus of much attention. As originally enacted, the 21st-Century Economy Fairness Act would have had a significant effect on online education.49 The legislation defined a digital product to include “prerecorded or live . . . speeches,” and the familiar “series of related images that, when shown in succession, impart an impression of motion, together with any accompanying sounds that are transferred electronically.”50 The law included no exception for ITFA compliance, leading the comptroller to advise that the sale of live, online continuing education programs was taxable.51 The comptroller similarly concluded that “a charge for viewing a course or lecture online by a college or graduate school is subject to the sales and use tax.”52
The Maryland General Assembly quickly reversed course, introducing several exclusions in Digital Advertising Gross Revenues, Income, Sales and Use, and Tobacco Taxes — Alterations and Implementation.53 With respect to the ITFA, Maryland law now contains two exclusions from the definition of digital product for live programs. The first is “instruction in a skill or profession in a buyer’s current or prospective business, occupation, or trade.”54 This reflects a different policy choice than that made by the North Carolina General Assembly. North Carolina law offers favorable treatment for instruction that prepares an individual for gainful employment, whereas Maryland law offers favorable treatment for instruction in the individual’s current business. The second exclusion is “a seminar, discussion, or similar event hosted by a nonprofit organization or business association.”55
In both cases, Maryland law also requires that the instruction or seminar feature an interactive element between the buyer and the instructor/host or other buyers contemporaneous with the event. This differs from Washington’s approach, which requires the participants in live presentations to be connected to the instructor and to each other.56
Regarding online education specifically, the General Assembly added a broad exclusion for “prerecorded or live instruction by a public, private, or parochial elementary or secondary school or a public or private institution of higher education.”57 Unlike Wash. Rev. Code section 82.04.192(3)(b)(ix), the Maryland exclusion does not require the instruction to be encompassed within the institution’s accreditation.58
IV. The Upshot
Each of these four states’ exclusions or exemptions resembles one another, and in some cases they produce the same results. For example, each of the four states excludes or exempts both live and prerecorded university courses offered for academic credit.59 All four states also exclude or exempt live, interactive online CLE programs offered by universities.60 However, if a university removes the ability for interaction, Washington taxes the sale as a digital product.61 If the university goes one step further and sells the program prerecorded, it becomes subject to sales tax in North Carolina and Washington.62 If the university adds the interaction back but keeps the program prerecorded, it becomes excluded in North Carolina but remains taxable in Washington.63
Some universities have created or acquired subsidiaries for selling continuing education programs. In considering the sales taxation of programs offered by universities’ subsidiaries, subtle differences in the law yield even more varied results. All four states exclude or exempt live online CLE programs offering interaction between participants and each other and between participants and the instructor.64 However, if the technology does not connect participants with each other, then Washington taxes the sale as a digital product.65 If the program is prerecorded, Washington and Maryland tax the sale regardless of whether it includes live interaction;66 North Carolina may exempt the prerecorded program if the subsidiary offers it on behalf of its university parent and includes interaction between the instructor and participants in the program.67 Wisconsin exempts the sale of prerecorded CLE programs broadly under its true objective test,68 but if the CLE is removed, Wisconsin’s exemption hinges on interaction or evaluation.69
V. Opportunities
As digital goods continue to replace physical goods, states may look to protect their sales tax base by taxing the sale of goods regardless of form. Just this year, the Multistate Tax Commission’s Uniformity Committee tasked a standing subcommittee with analyzing the sales taxation of digital goods, a step that is expected to result in a white paper and could lead to the development of model legislation.70 However, definitions that describe digital goods can also describe services delivered in digital form, such as education. This risk is particularly significant in navigating the SSUTA definition of digital audiovisual work, which can describe most online education. If legislation does not clearly distinguish between digital goods and educational services it can result in litigation, as occurred in Wisconsin,71 or it can require amendment, as occurred in Maryland.72
Legislators and regulators seeking to draw these distinctions are not working from a blank slate. Washington, Wisconsin, North Carolina, and Maryland offer a menu of options for states to consider and build on. In complying with the ITFA, legislators could offer a broad exemption for services provided in real time, as in North Carolina,73 or could also require interactive elements or technology, as in Washington and Maryland.74 Depending on their policy objectives, legislators could exclude all university instruction, as in Maryland,75 university instruction encompassed within the institution’s accreditation, as in Washington,76 or university instruction that meets one of several criteria, as in North Carolina.77 Legislators can also choose whether to require technology that connects participants with each other and with instructors, as in Washington and Wisconsin,78 that connects participants with instructors, as in North Carolina,79 or either, as in Maryland.80
Colleges, universities, and other educational organizations have opportunities as well. Rather than wait for legislation to be enacted, educational organizations may choose to discuss prospective legislation with their legislators. By sharing examples of the different types of online education that organizations offer, they can inform legislators’ drafting decisions and help avoid unintended consequences.
The sales taxation of online education may have begun by accident, but precedent from other states offers an opportunity to proceed with intention. With careful drafting, states are well-positioned to develop legislation that accomplishes their policy objectives in this rapidly developing space.
FOOTNOTES
1 See, e.g., N.C. Gen. Stat. sections 105-164.3(227) and (235).
2 SSUTA section 332 (Sept. 20, 2007). The definition was effective January 1, 2008. SSUTA does not require member states to tax digital products; it only requires the adoption of uniform definitions.
3 SSUTA Appendix C, Part II, at 111 (May 20, 2021).
4 Id.
5 Educators describe live instruction as “synchronous” and all other instruction, including prerecorded instruction available on demand, at scheduled times, or upon completion of assignments or modules, as “asynchronous.” For consistency with the tax laws discussed herein, this article uses the terms “live” and “prerecorded.”
6 Most colleges and universities are exempt from federal income tax as organizations described in IRC section 501(c)(3), have income excluded from federal gross income under section 115(1), or are immune from federal income tax under the doctrine of intergovernmental tax immunity. However, these federal exemptions, exclusions, and immunities do not per se relieve colleges and universities of the obligation to collect and remit sales tax under state law. Compare Iowa Code section 423.3(78)(a) (exempting sales when the profit is used by a 501(c)(3) organization, government entity, or educational institution and the proceeds are expended for qualifying purposes) with An Act to Make Various Changes to the Revenue Laws, Sess. L. 2016-5, section 3.9.(a) (N.C. 2016) (repealing N.C. Gen. Stat. section 105-164.13(34), which had exempted sales by nonprofit entities when the proceeds were given to the state).
7 2021 Md. Laws Ch. 38.
8 Digital Advertising Gross Revenues, Income, Sales and Use, and Tobacco Taxes — Alterations and Implementation, 2021 Md. Laws Ch. 669, section 1.
9 Compare Business Tax Tip #29, Sales of Digital Products and Digital Code, at 7-8 (Mar. 9, 2021) with Business Tax Tip #29, Sales of Digital Products and Digital Code, at 5, 10-13 (June 3, 2021).
10 In the Matter of Study.com LLC, No. 2020-310-2-0649 (2021). The director of revenue found that the sale of Study.com’s learning plans constituted the sale of software as a service and the sale of specified digital products, both of which are subject to sales tax in Iowa. Id. at 10 n.12. However, only for-profit providers are required to collect sales tax on online education in Iowa. Iowa exempts nonprofit and state colleges and universities from the requirement to collect sales tax on the sale of most tangible personal property, specified digital products, and services. Iowa Code section 423.3(78)(a).
11 47 U.S.C. section 151 note section 1101(a). The ITFA was enacted in 1998 by P.L. 105-277, Div. C, Title XI (1998). It was made permanent by the Trade Facilitation and Trade Enforcement Act of 2015, P.L. 114-125, Title IX, section 922 (2016).
12 47 U.S.C. section 151 note section 1105(2)(i).
13 Determining what constitutes a similar property, good, or service under the ITFA, and how to apply the ITFA in the absence of a similar property, good, or service, is the subject of litigation in Maryland. Chamber of Commerce of the United States of America v. Franchot, No. 1:21-cv-00410, complaint para. 76 (D. Md. 2021); Comcast of California/Maryland/Pennsylvania/Virginia/West Virginia LLC v. Comptroller of the Treasury of Maryland, No. C-02-CV-21-000509, complaint para. 67 (Cir. Ct. for Anne Arundel County 2021). For a discussion of the statutory and constitutional considerations in the Maryland litigation, see Darien Shanske, Christopher Moran, and David Gamage, “Maryland’s Digital Tax and the ITFA’s Catch-22,” Tax Notes State, Apr. 12, 2021, p. 141.
14 Some states exclude some online education from the definition of digital audiovisual work or digital good, whereas others include online education in the definition of digital audiovisual work but exempt its sale from taxation.
15 Wash. Rev. Code section 82.04.050(8)(a) (retail sale includes the sale of digital goods and digital automated services).
16 Wash. Rev. Code sections 82.04.192(6)(a) (digital goods include specified digital products) and 82.04.192(9) (specified digital products include digital audiovisual works).
17 Wash. Rev. Code section 82.04.192(6)(b)(v) excludes from the definition of digital good those services and activities excluded from the definition of digital automated services in sections 82.04.192(3)(b)(ix) and (x), discussed infra.
18 Wash. Rev. Code section 82.04.192(3)(b)(x).
19 Wash. Admin. Code section 458-20-15503(303)(j), Ex. 13.
20 Wash. Admin. Code section 458-20-15503(303)(j), Ex. 14.
21 Wash. Rev. Code section 82.04.192(3)(b)(ix); Wash. Admin. Code section 458-20-15503(303)(i), Ex. 11. See also Det. No.15-0354, 35 WTD 504 (2016) (resource and library fees charged to students enrolled in an accredited online educational program are exempt).
22 In fact, the Legislature excluded online educational programs offered by schools before adding an exclusion for ITFA compliance. An act relating to the excise taxation of certain products and services provided or furnished electronically, 2009 Wash. Sess. L. 3222 section 201 (eff. July 26, 2009) (enacting Wash. Rev. Code section 82.04.192(3)(b)(ix)); an act relating to excise taxation of certain products and services provided or furnished electronically, 2010 Wash. Sess. L. 814 section 203 (enacting Wash. Rev. Code section 82.04.192(3)(b)(x)).
23 Wis. Stat. section 77.54(50).
24 State of Wisconsin Department of Revenue, Publication 240, “Digital Goods — How Do Wisconsin Sales and Use Taxes Apply to Sales and Purchases of Digital Goods?” Section XIII.D. (May 2016).
25 State Bar of Wisconsin v. Wisconsin Department of Revenue, No. 16-S-139, 2019 WL 5866696, at 5 (Wis. Tax App. Comm’n 2019).
26 Id.
27 Id. at 6.
28 Id. The bar did not brief any other potential tangible form for the digital audiovisual works other than the live, in-person seminars.
29 Id. at 8.
30 Id. at 7.
31 Id. at 9.
32 Id. at 8-11.
33 Id. at 12.
34 Wisconsin Department of Revenue, “Sales Tax Treatment of Educational Products, Goods, and Services,” Guidance Document 100274 (Nov. 16, 2020).
35 Wash. Admin. Code section 458-20-15503(303)(j), Ex. 14.
36 Wash. Rev. Code section 82.04.192(3)(b)(x).
37 Wisconsin Guidance Document 100274.
38 Current Operations and Capital Improvements Appropriations Act of 2009, Sess. L. 2009-451, section 27A.3.(e) (N.C. 2009) (imposing tax on sales of digital property effective January 1, 2010).
39 Id.
40 SUPLR 2011-0010.
41 Legislative Analysis Division, Bill Analysis of Sess. Law 2020-6 (June 11, 2020). See also Legislative Analysis Division, Bill Analysis of Sess. Law 2019-169, section 3.1(b) (Dec. 9, 2019).
42 Sess. Law 2019-169, An Act to Make Various Clarifying and Administrative Changes to the Revenue Laws, section 3.1(b) (N.C. 2019).
43 Sess. Law 2020-6, An Act to Make Various Sales and Use Tax Changes, as Recommended by the Revenue Laws Study Committee, section 3.(a) (N.C. 2020).
44 N.C. Gen. Stat. section 105-164.13(73).
45 North Carolina imposes sales tax on some services, so this approach allows taxation of digital property when the in-person service would itself be taxable. See, e.g., N.C. Gen. Stat. section 105-164.4G, imposing sales tax on admission to entertainment activities.
46 N.C. Gen. Stat. section 105-164.3(33).
47 N.C. Gen. Stat. section 105-164.3(75). Similar to Wash. Rev. Code section 82.04.192(3)(b)(ix), qualifying educational entities include elementary or secondary schools and institutions of higher education. N.C. Gen. Stat. section 105-164.3(203).
48 N.C. Gen. Stat. section 105-164.13(72).
49 2021 Md. Laws Ch. 38.
50 21st-Century Economy Fairness Act section 1.
51 Business Tax Tip #29 Sales of Digital Products and Digital Code, at 7 (Mar. 9, 2021) (“There is no exemption from sales and use tax under Maryland law for the sale of a digital product on the basis that the product would have been exempt from sales and use tax if it had been delivered in tangible form or by other means.”).
52 Id. at 8. The comptroller noted in a footnote that “it is unclear from the legislative history or the statutory language whether charges for tuition at a college or graduate school are subject to sales and use tax if the school either partially or wholly delivers lectures electronically.” Id. n.24.
53 2021 Md. Laws Ch. 669, section 1.
54 Md. Code, Tax-Gen. section 11-101(c-4)(3)(ii).
55 Md. Code, Tax-Gen. section 11-101(c-4)(3)(iii).
56 Wash. Rev. Code section 82.04.192(3)(b)(x).
57 Md. Code, Tax-Gen. section 11-101(c-4)(3)(i).
58 The Maryland comptroller has issued an updated Business Tax Tip #29, Sales of Digital Products and Digital Code (June 3, 2021).
59 Wash. Rev. Code section 82.04.192(3)(b)(ix); N.C. Gen. Stat. section 105-164.3(75); Md. Code, Tax-Gen. section 11-101(c-4)(3)(i). Wisconsin’s guidance document does not expressly exclude prerecorded academic instruction, but the instruction would very likely be excluded by the true objective test of State Bar of Wisconsin and by the evaluation and interaction components of Guidance Document 100274.
60 Wash. Rev. Code section 82.04.192(3)(b)(x); N.C. Gen. Stat. section 105-164.13(73); Md. Code, Tax-Gen. section 11-101(c-4)(3)(i); State Bar of Wisconsin, No. 16-S-139.
61 Wash. Rev. Code section 82.04.192(3)(b)(x) (programs not encompassed within the institution’s accreditation must have technology that allows audience members to interact to be excluded).
62 N.C. Gen. Stat. section 105-164.13(73) exempts a sale only when it occurs contemporaneously with the provision of a nontaxable service in real time, and N.C. Gen. Stat. section 105-164.3(75) would not apply to continuing education with no evaluation or interaction.
63 The program would be an educational service described in N.C. Gen. Stat. section 105-164.3(75)d.
64 Wash. Rev. Code section 82.04.192(3)(b)(x); N.C. Gen. Stat. section 105-164.13(73); Md. Code, Tax-Gen. section 11-101(c-4)(3)(ii); State Bar of Wisconsin, No. 16-S-139.
65 Wash. Rev. Code section 82.04.192(3)(b)(x) (programs not encompassed within the institution’s accreditation must have technology that allows audience members to interact with each other and with the instructor).
66 Id.; Md. Code, Tax-Gen. section 11-101(c-4)(3) (excluding prerecorded programs only if offered by a school or institution of higher education).
67 N.C. Gen. Stat. section 105-164.3(75) (educational service includes instruction by or on behalf of a qualifying educational entity if the technology allows live interaction) (emphasis added).
68 State Bar of Wisconsin, No. 16-S-139.
69 Wisconsin Guidance Document 100274.
70 Amy Hamilton, “State Taxes and the Digital Economy: NFTs and the MTC Project,” Tax Notes Today State, June 22, 2021.
71 State Bar of Wisconsin, No. 16-S-139.
72 Digital Advertising Gross Revenues, Income, Sales and Use, and Tobacco Taxes — Alterations and Implementation, enacted following 21st-Century Economy Fairness Act.
73 N.C. Gen. Stat. section 105-164.13(73).
74 Wash. Rev. Code section 82.04.192(3)(b)(x); Md. Code, Tax-Gen. section 11-101(c-4)(3)(ii) and (iii).
75 Md. Code, Tax-Gen. section 11-101(c-4)(3)(i).
76 Wash. Rev. Code section 82.04.192(3)(b)(ix).
77 N.C. Gen. Stat. section 105-164.3(75).
78 Wash. Rev. Code section 82.04.192(3)(b)(x); Guidance Document 100274. Washington also requires the interactive program to be live, whereas Wisconsin exempts the interactive program even if it is prerecorded.
79 N.C. Gen. Stat. section 105-164.3(75)d.
80 Md. Code, Tax-Gen. section 11-101(c-4)(3)(ii) and (iii).