Is a trade association's live/recorded webinar training for bank employees, with free downloadable training materials, subject to Texas sales tax?

Plain-English summary

The Texas Comptroller ruled that a nonprofit trade association's webinar training for community bank employees is a nontaxable educational service, issued the same day as a near-identical companion ruling (201902012L) for a different training provider. The association hosts live online presentations where bank employees post questions in a chat room for the presenter to answer, records the sessions for later on-demand viewing, and gives employees a free digital download of the training materials.

Following the same two-step test as the companion ruling, the Comptroller found the webinars aren't a taxable amusement service because they're "primarily instructional in nature" — they educate bank employees on complex banking regulations and can satisfy continuing-education and regulatory-compliance requirements, which is strong evidence of an educational purpose. They're also not a taxable information service because the association doesn't gather, maintain, or compile information for sale; it delivers instructional content instead. The free training materials are treated as incidental to the nontaxable course.

What this means for you

Trade associations and professional training providers

If your organization delivers live or recorded webinar training tied to a member industry's regulatory or continuing-education requirements — with typical features like Q&A, recordings, and supplementary materials — Texas is likely to treat the charge as nontaxable education rather than a taxable amusement or information service. The regulatory/CE angle here is a particularly strong fact for the education characterization.

Financial-services and other regulated-industry training

This ruling and its same-day companion (201902012L) suggest the Comptroller applies a consistent framework across different training providers with similar formats (live webinar + chat Q&A + recording + free materials), rather than varying results by industry.

Accountants and tax professionals

Note the association still owes tax on the taxable items it purchases to produce the training (recording equipment, software licenses, etc.) even though the training itself is exempt — the exemption runs to the sale of the educational service, not to the provider's own input purchases.

Common questions

Q: Does making training free or bundled with membership dues change the tax analysis?
A: This ruling doesn't turn on price structure — it turns on whether the content is primarily instructional versus amusement/information. The free training-materials download is simply treated as incidental to the (already nontaxable) instructional service.

Q: Does regulatory/continuing-education content matter to the analysis?
A: Yes — the Comptroller cited the webinars' ability to satisfy continuing education and regulatory compliance requirements as evidence supporting the "primary purpose of education" finding.

Q: Is this the same ruling as 201902012L?
A: No, it's a separate ruling for a different taxpayer (a bank trade association vs. a general online educator) issued the same day, reaching the same nontaxable conclusion on similar facts.

Q: Can another association rely on this ruling?
A: No. It binds the Comptroller only as to the taxpayer and facts in this specific request and cannot be relied on by any other taxpayer.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051 (sales tax imposed)
• Tex. Tax Code § 151.010 (taxable item)
• Tex. Tax Code § 151.0101(a)(1), (10) (taxable services)
• Tex. Tax Code § 151.0028 (amusement services)
• Tex. Tax Code § 151.0038 (information services)
• 34 Tex. Admin. Code Rule 3.298(a)(2) (Amusement Services)
• 34 Tex. Admin. Code Rule 3.342(a)(6) (Information Services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/201902013L

Original ruling text

February 22, 2019

RE: Private Letter Ruling No. 20180912114821

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters.[1] We are responding to your request dated Aug. 30, 2018 and subsequent email correspondence dated Oct. 2, 2018. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on the taxability of webinar training courses for bank employees.

Facts Presented

** (Taxpayer) is a nonprofit trade association that provides an array of services to independent community banks in Texas. Taxpayer offers training programs for bank employees using webinars. These webinars are live online presentations during which participating viewers can submit questions for the presenters. Participants post questions in a “chat room” for the speaker to answer. Taxpayer records the webinars and posts them on its website. Bank employees can use a link on Taxpayer’s website to view a presentation in real time or they can wait and download the recording onto their computer to view it later. Taxpayer also provides a free digital download of the training materials that bank employees can access on different devices (e.g., computer, phone, tablet).

Question, Ruling, and Analysis

Our restatement of your question is shown below, followed by our response and analysis.

Question: Are charges for Taxpayer’s training webinars subject to sales and use tax under Tax Code, Chapter 151 (Limited Sales, Excise, and Use Tax)?

Ruling: No. Taxpayer’s training webinars are nontaxable educational services.

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state. Section 151.051 (Sales Tax Imposed). The term “taxable item” includes tangible personal property and taxable services. Section 151.010 (Taxable Item). Only specifically enumerated services are taxable in Texas. Amusement services and information services are both taxable services. Section 151.0101(a)(1), (10) (“Taxable Services”).

An amusement service is “the provision of amusement, entertainment, or recreation, but does not include the provision of educational or health services if prescribed by a licensed practitioner of the healing arts for the primary purpose of education or health maintenance or improvement.” Section 151.0028 (“Amusement Service”). Rule 3.298 (Amusement Services) explains that “nonamusement services” include “activities that are primarily instructional in nature….” Rule 3.298(a)(2).

Taxpayer’s webinars are not an amusement service because the online training programs educate bank employees on complex banking regulations and practices. The webinars may even satisfy continuing education and regulatory compliance training requirements. Accordingly, Taxpayer’s webinar services are primarily instructional in nature. See Rule 3.298(a)(2) (Amusement Services).

Section 151.0038 (“Information Service”) defines an information service as “furnishing general or specialized news or other current information” or “electronic data retrieval or research.” Rule 3.342(a)(6) (Information Services) states that information “gathered, maintained, or compiled and made available by the provider of the information service to the public or to a specific segment of industry for a consideration is subject to sales tax.” The rule provides examples of these services, including “newsletters, scouting reports and surveys, mailing lists and bad check lists, real estate listings, financial reports, and news clipping services and wire services. See Rule 3.342(a)(6).

Taxpayer’s webinars do not resemble the types of services described in Rule 3.342(a)(6) and are not taxable information services. Taxpayer does not gather, maintain, or compile information for its customers. Based on the examples in Rule 3.342, Taxpayer’s training programs are also not general or specialized news or other current information. The Comptroller has treated these kinds of services as nontaxable educational services. See STAR Accession Nos. 201809008L (Sept. 11, 2018) and 201809009L (Sept. 11, 2018).

Although Taxpayer provides networking events and training materials such as guides and answer keys, which are tangible personal property, the materials are incident to and included in the sales price of the educational courses. Therefore, Taxpayer owes tax on the taxable items purchased to provide Taxpayer’s nontaxable online educational courses.

Comptroller’s Decisions and STAR documents cited can be found on the Comptroller’s State Tax Automated Research (STAR) system. The Texas Tax Code, Texas Administrative Code, and the STAR system are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20180912114821.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE:

[1] Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.