New York – Taxability of Online Driver’s Training Courses


SALT Report 2106 – The New York Department of Taxation and Finance issued and advisory opinion regarding the taxability of online driver’s training courses.  The Taxpayer in this case conducts online driver’s education courses that are regulated by the New York Department of Motors under its Points and Insurance Reduction Program.  Upon completion of the course participates receive a certificate from the Taxpayer, which entitles the person to a reduction of points on their driver’s license, which usually translates into a reduction in their auto insurance premiums.

While the Taxpayer’s program requires the use of software, the only control that the student has over the software is the ability to determine the order in which the course segments are viewed and they have the ability to stop and restart the course at any time.  Further, the Taxpayer’s written agreement with its students clearly states that the student is not purchasing or acquiring a license to the software.

In their decision, the Department stated that access to online educational materials that involve the transfer of prewritten software usually constitutes the licensing of taxable software.  However, the provision of an online education course can also constitute a non-taxable educational service if the product extends beyond the use of the software.  Because the Taxpayer has the ability to monitor a student’s attendance and progress, conduct online proctoring of tests and final examinations, and issues a certificate of completion, the Department stated that these are duties similar to those performed by a formal educational institution.

Therefore, the Department determined that the students are not purchasing software from the Taxpayer but, rather, they are paying the Taxpayer to participate in a course of study that is not subject to sales tax.  Accordingly, the taxpayer is not required to collect sales tax on its sales of online driver’s education training courses.

For Further Information

New York Commissioner of Taxation and Finance – TSB-A-13(1)S