The North Carolina Legislature is considering legislation that would broaden the state sales tax to include digital content offered by associations and other businesses.

Associations offering on-demand webinars and other products in a digital form that aren’t free could be impacted by the bill. Certification tests would not be subject to the tax although online prep courses for certification or other online continuing education courses could be taxable under the legislation.

The bill is similar to tax changes made in Pennsylvania impacting association membership fees. The Pennsylvania Department of Revenue (DOR) issued a sales and use tax ruling earlier this year clarifying that membership fees to join a professional association are taxable if the member receives tangible personal property in addition to non-taxable services in exchange for their dues payment.

While the ruling acknowledges that a membership fee in and of itself is not taxable, it states that “if the membership fee includes the transfer of taxable tangible personal property, in addition to nontaxable services, the entire charge for the membership is subject to tax.” Tangible personal property could include things like videos, books or other publications, apps and webinars or other goods digitally delivered, streamed or accessed.

ASAE delivered a letter March 4 to the Pennsylvania DOR seeking more information about the department’s interpretation. In its letter, ASAE questioned the rationale for taxing membership dues of professional associations in any circumstance, since dues do not qualify as unrelated business income under federal law. ASAE is concerned about the impact of this tax on both associations based in Pennsylvania and national organizations that might be required to collect sales tax on “tangible property” provided to members who reside in the state. ASAE also asked the department for clarity on whether educational materials or fees charged for professional certifications might also be considered tangible property.