Tax Treatment of Online Seminars

NOTE: This Article Has Been Replaced by a Revised Article Dated June 17, 2014. See the new article...

Statutes: Sections 77.51(3p), (17x), 77.52(1)(a) and (d), and 77.54(50), Wis. Stats.

Introduction: Section 77.52(1)(d), Wis. Stats., as created by 2009 Wis. Act 2, imposes the sales tax, in part, on a retailer's sales price from the sale, license, lease, or rental of specified digital goods at retail for the right to use the specified digital goods on a permanent or less than permanent basis and regardless of whether the purchaser is required to make continued payments for such right.

Section 77.52(1)(a), Wis. Stats., as affected by 2009 Wis. Act 2, imposes the sales tax on a retailer's sales price it receives from the retail sale, license, lease, and rental of tangible personal property.

Under sec. 77.51(17x), Wis. Stats., as created by 2009 Wis. Act 2 and amended by 2009 Wis. Act 28, "specified digital goods" includes digital audio works and digital audiovisual works.

"Digital audiovisual work" is defined by sec. 77.51(3p), Wis. Stats., as created by 2009 Wis. Act 2, to mean: "a series of related images that, when shown in succession, impart an impression of motion, along with accompanying sounds, if any, and that are transferred electronically. 'Digital audiovisual works' includes motion pictures, musical videos, news and entertainment programs, and live events, but does not include video greeting cards or video or electronic games."

Section 77.54(50), Wis. Stats., as created by 2009 Wis. Act 2 and amended by 2009 Wis. Act 28, provides an exemption for: "The sales price from the sale of and the storage, use, or other consumption of specified digital goods or additional digital goods, 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 under this subchapter."

Facts (1): Company A is providing a seminar that is primarily educational. The seminar is a one-day event held in a meeting room at a hotel located in Wisconsin. In order to attend the event at the hotel, each attendee is required to pay a fee of $350. The $350 fee to attend the seminar is not subject to Wisconsin sales and use taxes, since the service of providing an educational seminar is not one of the services specifically enumerated in sec. 77.52(2), Wis. Stats., as a service that is subejct to Wisconsin sales or use taxes. As an alternative to attending the event in person, an individual may pay a fee of $375 and watch and listen to the seminar by way of a live video stream of the event. The person choosing this option must have a suitable computer, monitor, and Internet access to view the video stream of the seminar. Company A does not provide any interactive capability with the live video stream option. That is, Company A does not provide the viewer with the capability to interact with the speaker, other persons subscribing to the video stream, or with persons attending the seminar in person at the hotel.

Question (1): Is Company A liable for Wisconsin sales or use tax relating to its receipts from selling the right to listen to and view a live video stream of the seminar as receipts it receives from the sale, license, lease, or rental of a digital audiovisual work?

Answer (1): No. Company A is not liable for Wisconsin sales or use taxes relating to its receipts from selling the right to listen to and view the seminar as a digital audiovisual work. Although Company A's receipts are from its sale of the right to use a digital audiovisual work, as defined in sec. 77.51(17x), Wis. Stats., on a permanent or less than permanent basis, the exemption in sec. 77.54(50), Wis. Stats., applies, since the sale of the right to view and listen to the seminar in its "tangible" form (i.e., at the hotel), is not subject to Wisconsin sales or use taxes.

Facts (2): Same facts as (1). In addition, Company A makes a video recording of the seminar. For $100, a purchaser may order and receive a recorded version of the seminar. The purchaser has the option to order the recorded version of the seminar as a DVD or may elect to download the recorded seminar using the Internet and record the copy of the seminar to their computer hard drive.

Question (2): Is Company A liable for Wisconsin sales or use tax on its sales of the recorded seminar?

Answer (2): Yes. Company A is liable for Wisconsin sales and use taxes on its sales of the recorded version of the seminar, whether sold as a DVD or as an electronic download.

The $100 Company A receives from its sale of the recorded seminar as a DVD is from a sale of tangible personal property subject to tax under sec. 77.52(1)(a), Wis. Stats.

The $100 Company A receives from its sale of the recorded seminar as an electronic download using the Internet is from a sale of a digital audiovisual work (a specified digital good) subject to tax under sec. 77.52(1)(d), Wis. Stats. The exemption under sec. 77.54(50), Wis. Stats., does not apply to the sale of this digital good, since the recorded version of the seminar sold in a tangible form (i.e., on a DVD), is subject to Wisconsin sales and use taxes.

Note: Answer 2 assumes that the sale of the recorded seminar as a DVD or as an electronic download is sourced to (i.e., takes place in) Wisconsin, as determined under sec. Tax 11.945(2), Wis. Adm. Code (November 2010 Register).

Page last updated January 28, 2011