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Should you collect sales tax on educational materials?

  • Mar 14, 2017 | Suzanne Kearns

There is a common misconception that educational materials sold to schools and clubs are automatically sales tax exempt, but the truth is a bit more complicated.

Just as in any other area of sales tax compliance, the rules vary from state to state. If you sell tangible personal products that are used for educational purposes, whether they’re books, toys, or something else, you need to understand the sales tax rules for every state where you have nexus.

State by state

Just to demonstrate how diverse the rules are in various states, here’s an overview of just some of the rules for both nonprofit and for-profit organizations regarding sales tax and educational products.

  • In Wisconsin, buyers of educational products pay sales tax on things like books, CDs, DVDs, and videotapes unless they're tax exempt. According to the Wisconsin Department of Revenue, that’s because “the seller is not performing an educational service, but rather selling tangible personal property.”
  • In New York, educational nonprofits can apply for tax-exempt status, and if granted they do not have to pay sales tax on educational products. If a buyer wants to purchase educational products tax free, be sure to ask to see their Exempt Organization Certificate, which contains a six-digit exemption number. Please note that a buyer cannot use their nine-digit federal employer identification number to achieve tax-exempt status in New York.
  • In Florida, products like books and educational toys are exempt for qualified childcare facilities.
  • In Texas, any educational organization can apply for tax-exempt status, and if granted, it will not have to pay sales tax on products purchased for educational purposes.
  • In South Dakota, only some organizations are considered tax exempt and won’t have to pay sales tax on educational products. For example, religious educational institutions are exempt, as are nonprofit accredited private educational institutions that are registered with the South Dakota Department of Revenue.

What about digital sales?

Some educational products are sold digitally, and just as states have differing rules on educational tangible personal products, they do on digital sales as well. For example, Wisconsin digital books and prerecorded seminars for educational purposes are taxable, but live digital online educational services are not. And in Texas, online mentoring and e-courses are not subject to sales tax, but if you sell a related book, CD, or DVD, you’ll have to collect sales tax on it on a separate invoice.

If you sell educational products, whether they’re tangible personal property or digital, you need to know the rules. Start by contacting the states you have nexus in and asking whether or not you should charge your customers sales tax on their purchases. You can find a list of all government offices with contact information on the IRS website.

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.
Avalara Author
Suzanne Kearns
Avalara Author Suzanne Kearns