The Texas Comptroller recently determined that a taxpayer’s charges for access to online educational courses were not subject to sales and use tax. The taxpayer at issue offered an online education platform that provided instruction by streaming pre-recorded lectures taught by professors from accredited universities. The courses included access to syllabi, quizzes, modules, online discussion forums that enabled enrolled students to discuss the course. Access to these courses was usually free, but the taxpayer charged for access to certain “Signature Track” courses for which a student could obtain credit at a partner university.
Under Texas law, sales tax is imposed on sales of enumerated taxable services, including cable television services and information services. The Comptroller first examined whether the taxpayer’s courses were taxable as cable television services. Cable television services are services that “distribute video programming with or without the use of wires . . . to paying customers,” and, by Comptroller rule, include “streaming video programming provided via the Internet … video on demand services or subscription services that allow the purchaser to choose from a library of available content.” The Comptroller determined that, although the definition of cable television services was broad enough to include the taxpayer’s online courses, because the taxpayer’s courses were primarily instructional in nature, they were not taxable cable television services. In other words, the taxpayer was providing nontaxable educational services, not taxable cable television services. Second, the Comptroller examined whether the taxpayer’s services were taxable information services. Information services are services that “furnish general or specialized news or other current information” or “electronic data retrieval or research.” Examples of information services include newsletters, real estate listings, and mailing lists. The Comptroller concluded that the taxpayer’s services were not information services, as the taxpayer did not compile information for customers, but provided instruction and verified that enrolled students were competent in the subject matter taught in a course. Please contact Chad Woodfork at 713-319-3846 with questions on Private Letter Ruling No. 2017010115.