Taxability update for virtual learning, training for employees in Connecticut

CONNECTICUT – Companies offering virtual learning or online training to their employees will welcome the latest sales tax ruling from the Connecticut Dept. of Revenue.

Bottom line: Online learning plans don’t count as digital taxable goods under state tax law, according to Ruling No. 2022-2.

Details of online learning plans

The company mentioned in the ruling offers clients an online learning platform. The platform has various on-demand digital courses.

Courses cover many topics. And users can access the courses from mobile devices or computers.

Employees must access courses through the internet. However, they can download a cached version of a course to access it temporarily if they lose internet access. But the company will only update a student’s course progress on its servers when internet access resumes.

Employers can purchase courses for learners through various “learning plans” the company offers.

Sample learning plans include a tutor access plan and courses with access to a live tutor. Plus, you can purchase courses with assessments and access to a live tutor. Features of each plan vary.

Taxability guidelines

But are the learning plans considered digital goods, which would make them tangible personal property that’s subject to sales and use tax?

No, said the Dept. of Revenue.

Here’s why: The true purpose of the sale of the learning plans is to provide customers with a nontaxable service related to education or training. So they don’t count as digital goods.

And since any services related to training or education are typically not taxable, sales and use tax doesn’t apply.

Exception you need to know

However, take note. There is an exception to this rule for certain employment-related training often purchased by businesses.

Sometimes, job-related training counts as a taxable training service under state tax regs. If the training fits the category of a “business management consulting service,” the purchase is subject to a 6.35% sales tax.

But business training isn’t taxable if you provide it to employees as a:

• general education seminar (or a refresher course)
• course covering current developments in a specific field, or
• course that’s necessary for them to earn continuing education credits.