Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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385.0000 NEWSPAPERS AND PERIODICALS—Regulation 1590

Annotation 385.0577


385.0577 Subscription to Periodical with CD ROM Disk Containing Games, etc. A magazine qualifying as a periodical pursuant to Regulation 1590(a)(2) can be subscribed in one of two ways:

(1) Magazine Membership—one year, 4 issues $10.

(2) Multimedia Membership—one year 4 issues and 4 CD ROM disks for $30.

The CD-ROM disk that a multimedia member receives contains games, demos, and encrypted software. The CD ROM disk enables a member to demo a particular program that is sold by the publisher. After completion of the demo, a member may purchase such program by calling the publisher's 800 number and obtaining an unlock code which enables the program to be unscrambled then downloaded from the CD ROM disk to the member's computer. The multimedia member's credit card is billed for the price of the program before the unlock code is given to enable the download. The program prices can range from $15 to $50. A CD ROM disk has the capacity to contain more than 30 programs which all can be downloaded, including program documentation.

If a person who purchases the multimedia membership does not pay to unlock any further programs from the CD ROM disk, the taxable gross receipts from the sale of a multimedia membership is $20, that is, the $30 charged less the $10 charged for 4 issues of the periodical.

Tax applies to the publisher's charge to unlock the programs on the disk. When a purchaser pays an additional price to obtain further access to tangible personal property, that amount is includable in the retailer's gross receipts. 12/27/94.