North Carolina – Online educational content is exempt from North Carolina sales tax

On June 5, 2020, measure HB 1079 , exempting digital educational content from North Carolina sales tax was signed into law.

An educational service is not taxable digital property

The bill clarifies that, as of the effective date of the bill (June 5, 2020, unless otherwise noted) “an educational service” is not “certain digital property” subject to North Carolina sales tax.

It reads: “The delivery of instruction or training, whether provided in real time, on demand, or at another set time, by or on behalf of a qualifying educational entity,” is not a taxable service provided at least one of the following conditions applies:

  • The instruction or training is part of the curriculum for an enrolled student;
  • The instruction or training is encompassed within the institution’s accreditation or prepares an enrolled student for gainful employment in a recognized occupation;
  • The participant is evaluated by an instructor (does not include being graded, scored, or evaluated by a computer program or interactive, automated method); or
  • The participant is connected to the presenter or instructor via the internet or other networks, allowing the participant to provide, receive, or discuss information through live presentation, contemporaneous with the presentation.

The measure defines “qualifying educational entity” as an elementary school, secondary school, or institution of higher education as defined by the United States Code. It also clarifies that sales of a digital audio work or digital audiovisual work to the operator of a home school are exempt from retail sales and use tax, provided the sale is a qualifying education expense.

Finally, HB 1079 states that electronic sales of a digital audio work or digital audiovisual work consisting of “nontaxable service content” are exempt, provided the transfer occurs “contemporaneously with the provision of the nontaxable service in real time.”

Read the complete article here.

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By Gail Cole
June 8, 2020