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Washington: Online educational programs are exempt

 Online educational programs are generally exempt in Washington.

Washington sales and use tax applies to digital products such as downloaded digital goods (e.g., data, images, music and movies), streamed and accessed digital goods, and digital automated services (services that have been automated). Yet certain online educational programs are exempt.

After an audit, the taxability of online educational programs was disputed by a private educational institution (Taxpayer) that provides internet-based educational programs. The Taxpayer argued that “fees for online educational programs are specifically excluded from the definition of ‘digital automated service’ and not subject to taxation as retail sales.” Furthermore, it maintained that the following should be exempt:

  • Library fees
  • Nursing program fees
  • Resource fees
  • Science lab fees

After examining the case, the Appeals Division of the Washington State Department of Revenue determined that the “Taxpayer’s fees for its online educational programs are not taxable as retail sales.” In addition, the library and resource fees are part of Taxpayer’s exempt tuition fees under RCW 82.04.170, and the science lab and nursing program fees are also exempt tuition fees.

Use tax

However, the Department also concluded that the “Taxpayer may be subject to use tax on certain property or services included in its tuition fees.” It explained that the “facts are not clear in regard to the types of goods and services Taxpayer first put to use as a consumer in this state, the value of the goods and services it purchased, and whether Taxpayer paid sales tax on those services.” As a result, the Audit Division will continue its investigation “for further findings and possible adjustments.”

Additional information is available in Determination No. 15-0354 and on informational notice Digital Products including Digital Goods.

The taxability of digital goods and services remains a complex issue that complicates sales and use tax compliance for many businesses. Tax automation software helps simplify compliance. Learn how it works.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.