Recently the state of West Virginia (US) released a document affirming that entities selling streaming services in the state are subjected to sales and use tax.
In the document West Virginia’s tax department provided clarification of its definition of a “streaming service” and a “digital good”, then addressed sales and use tax obligations of entities selling streaming services in the states. Issues covered in the document can be summarized as follows:
What are streaming services?
A streaming service provider is generally a supplier of entertainment (music, movies, video games, etc.) or other content delivered electronically, usually by an internet, satellite or cable connection to the subscriber’s computer, television, mobile device, or any other device suitable for accessing such content.
What is the difference between a streaming service and the sales of digital products?
Streaming services differ from the sales of digital products. A digital product is a discrete identifiable item. For example, a consumer may buy or rent a movie at a specified price for the download and will thereby have bought or leased a digital product. This TSD does not cover sales of digital products, only the sales of streaming services.
Is a purchase of a streamed content the same as the purchase of a digital product?
When a consumer purchases streaming services, the consumer has generally bought access to curated entertainment content in the streaming service’s catalog, but has not procured a right to any specified digital product.
Are streaming services exempt from the sales and use tax obligations in West Virginia?
All sales of services in West Virginia are subjected to sales and use tax unless there is a specific exception or exemption outlined under West Virginia law. There is no sales tax exemption regarding the provision of streaming services in West Virginia. Accordingly, streaming services are subject to the West Virginia Consume Sales and Service Tax and Use Tax.
Can municipalities within West Virginia impose additional sales or use tax on streaming services?
An additional municipal sales or use tax not greater than one percent may also apply if the sale is sourced to a municipality that imposes a municipal sales and use tax. For a list of municipalities, effective dates, and rates, the Tax Department of West Virginia recommends users to check this link.
What are the tax obligations of streaming service providers physically based outside of West Virginia state?
If the streaming service provider does not have a physical presence in West Virginia and is an out-of-state remote seller, they should refer to TSD-406A for additional guidance.
Though the above-mentioned clarifications provide general information regarding the state and municipal sales and use tax requirements for streaming services, it is not a substitute for tax laws or regulations.
The content of this article is intended to provide a general guide to the subject matter. Specialist VAT advice should be sought about your specific circumstances.