By Derek Takehara and Andrew Appleby

The Oklahoma Tax Commission issued three Letter Rulings addressing the digital economy. First, the Commission ruled that receipts from sales of digital photos, videos and designs delivered via the Internet are not subject to sales tax when no tangible item is conveyed. The Commission also ruled that charges for Internet web designs are nontaxable. These determinations reiterate Oklahoma’s existing regulation on the taxability of internet-related services and transactions. Ok. LR-13-013 (July 11, 2013). Second, the Commission determined that receipts derived from the renewal of annual software maintenance contracts are not subject to sales tax when no physical media is supplied and software updates are available for download via the Internet. By statute, Oklahoma law exempts from sales tax prewritten software delivered to a customer electronically. Oklahoma’s regulations provide that this exemption includes optional software maintenance contracts under which prewritten upgrades are delivered to customers by means other than tangible storage media. Ok. LR-13-034 (Sept. 23, 2013). Third, the Commission ruled that receipts from sales of video game console points cards, video game console online membership cards and online points cards are not subject to sales tax. The Commission resolved the issue under Oklahoma’s gift certificate regulation, which exempts sales of gift certificates from sales tax. However, the Commission clarified that sales tax must be collected to the extent that the certificates are later redeemed for tangible personal property. Ok. LR-13-033 (Sept. 16, 2013).