Overview
The Texas Comptroller of Public Accounts ruled that a cloud-based software program used by nursing and other professional healthcare students during assigned courses at accredited universities and colleges is considered an educational service and is not subject to tax.
Program Characteristics
- The program is accessed via the internet.
- There is no local software application installed on a user’s device.
Why It’s Not Taxable
Not an Information Service
The program does not qualify as a taxable information service because:
- It does not involve the sale of general or specialized news or other current information.
- It does not match any examples listed under Tex. Admin. Code § 3.342(a)(6) relating to services that gather, maintain, or compile information for the public or for a specific segment of industry.
Not Data Processing
Although the program includes elements of data processing, it is determined that:
- The program is not a taxable data processing service.
Authority & Interpretation
The Comptroller holds exclusive jurisdiction to interpret whether services are taxable under Tex. Tax Code Ann. § 151.0101(b).
Educational Purpose
- The program provides educational instruction and evaluation to students.
- It is designed to support the courses provided by accredited universities and colleges.
- It is not considered a data processing service and is not subject to Texas sales and use tax.
Reference: Texas Private Letter Ruling No. 202206008L, 06/10/2022
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Frequently Asked Questions
Why is the cloud-based educational software not subject to Texas sales tax?
The software is considered an educational service because it provides instruction and evaluation to students enrolled in accredited colleges and universities. Under Texas law, educational services are not subject to sales tax.
Does accessing the program over the internet impact its taxability?
Yes. Since the software is accessed online and not installed locally on a user’s device, it does not meet the criteria for taxable software or information services under Texas tax law.
What makes this program different from an information service?
Information services generally involve selling news, data, or compiled content. This program does not provide current news or industry-specific compilations. Instead, it offers interactive educational content tailored to university coursework.
Is data processing involved in this software?
While the program includes some elements of data processing, it is not primarily a data processing service. Therefore, it is not taxable under Texas rules governing data processing services.
What legal authority supports this tax exemption?
The Texas Comptroller has the exclusive authority to interpret tax law under Tex. Tax Code Ann. § 151.0101(b). In this case, the exemption is based on Private Letter Ruling No. 202206008L, which concluded the software qualifies as a non-taxable educational service.