I just saw a press release issued by Ryan tax services firm. The release highlights a guidance letter made public by the Colorado Department of Revenue. You can click here to download the official letter (GIL-16-009), but the press release sums up the key points.
Apparently a company operating in Colorado wrote to the state Revenue Department to get clarification on whether they had to pay sales taxes on income generated through fee-based web seminars. They charged customers for three different types of offerings: Attending live webinars, watching recorded webinars, and accessing online self-study materials.
The Department of Revenue responded with the following guidance…
- Fees charged for attending a live webinar are NOT subject to sales tax
- Fees charged for watching a recorded webinar ARE subject to sales tax
- Fees charged for accessing electronic materials online ARE subject to sales tax
Obviously this letter applies only to companies paying taxes in the state of Colorado. But this could easily become precedent that gets considered or duplicated in other states.
The distinction between types of content is important, as I see an unambiguous trend in webinar consumption habits. The percentage of registrants who elect to attend live webinars is shrinking, while the percentage of registrants who choose to watch recordings on their own time is growing. Most webinar hosts view the two options as equivalent… As long as you capture the registration and fees and deliver the content, who cares how the audience consumes it? But now hosts in Colorado have a clear financial incentive to encourage more attendance at the live webinar.
Actually, the more I think about this, the more complex it gets. If you sell your webinar as an opportunity to participate live, but also offer the recording as an additional benefit, do you have to track which participants come to the live session? Or can you claim all income received before the live date as pertaining to access of the live session, and all income received after the live date as pertaining to access of the recording? This is going to impose a new burden on companies to segregate and identify those two revenue streams in ways that most companies don't track today. For companies with an ongoing webinar program that keeps adding live and archived offerings, the bookkeeping could get really nasty. Ugh.
If you derive income from online offerings, you may want to clarify the sales tax rules in your state. Sales tax legislation and technology definitions change all the time. You don't want to wait for an audit to find out you were supposed to be tracking different categories of revenue.