The Wisconsin Tax Appeals Commission recently determined that sales of on-demand seminars for continuing legal education (CLE) credit were not subject to sales and use tax. The taxpayer offered Wisconsin-licensed attorneys access to seminars and written materials to aid in increasing their legal knowledge and to aid in meeting CLE requirements established by the Wisconsin Supreme Court. The taxpayer’s seminars came in four formats: Live, Live Webcast, Replay Webcasts, and On-Demand. The on-demand seminars, at issue here, were prerecorded videos from previous Live Seminars that could be viewed at any time within 90 days of purchase. On audit, the Department of Revenue assessed tax on the on-demand seminars on the basis that they were taxable digital audiovisual works which are taxable under Wisconsin law.
After first concluding that the seminars were digital audiovisual works, the Commission applied the true object test (“true objective” in Wisconsin parlance) to determine whether an attorney’s purpose for purchasing an on-demand seminar was to obtain an educational service or to obtain the digital audiovisual work. After reviewing the taxpayer’s sales data, the Commission observed that almost all of the seminars sold were those that would entitle the viewer to CLE credits. This evidenced that attorneys purchased the on-demand seminars to satisfy their CLE requirements and “accomplish  his or her goals of legal education, competence, and good standing.” The attorneys were not intending to purchase a digital good or a “succession of images transferred electronically.” The Department argued that no “service” was performed in a video recorded in the past and so there was no service being purchased with a taxable good. In other words, the Department argued that there was no component of the transaction that was a “service” and so the true object test was inapplicable. Even if “[t]he majority of the activity of the service may have happened in the past,” the service here was an ongoing process and also included recordkeeping and compliance with rules set forth by the Wisconsin Supreme Court on CLE eligibility. The Commission concluded that the true object of the transactions at issue was for the purchasers to obtain an educational service, and the digital good was incidental to that service. For more information on State Bar of Wisconsin v. Wisconsin Department of Revenue, please contact Jill Nielsen at 312-665-2794.