By Charles Capouet and Open Weaver Banks
The Kansas Department of Revenue addressed the taxability of sales of video game access codes, subscription cards, point cards, and notional dollar value cards. Initial sales of access codes that allow customers to download video games or video game add-ons directly to the customer’s computer or other device are subject to sales tax, according to the Department, because the items are prewritten software. Generally, downloadable prewritten software that is delivered physically or digitally to a Kansas user is subject to Kansas sales tax. On the other hand, the Department ruled that initial sales of access codes that allow customers to access digital content for use in an online video game (typically a complete video game or additional content within a game) that resides on a third-party server are not taxable. Redemptions of such codes are also not subject to sales tax because the items are not prewritten software. Similarly, initial sales of subscription cards, point cards, and notional dollar value cards that may be redeemed for access to online networks that allow gameplay, interaction among other players on the network, access to digital online content, or the direct download of digital content to consumers’ devices are not taxable. The redemptions of the cards are also not taxable because the Department determined such items are not prewritten software. Kan. Private Letter Ruling No. P-2015-001, Kan. Dep’t of Revenue, (Mar. 25, 2015).