Interim guidance statement regarding the application of the printing and publishing B&O tax classification to digital subscriptions of magazines and periodicals

December 14, 2022

Purpose

This interim guidance explains when the preferential rate under RCW 82.04.280(1) applies to gross income from publishing digital versions of periodicals or magazines.

Background

Under RCW 82.04.280(1), the business activities of publishing periodicals or magazines are subject to a preferential B&O tax rate of 0.484 percent. WAC 458-20-143(3)(b) (Rule 143(3)(b)) explains that “Publishers of periodicals or magazines are taxable under the printing and publishing classification of the B&O tax upon the gross income (including advertising income) derived from publishing periodicals or magazines.” 

Availability of the printing/publishing rate to digital versions of periodicals or magazines

The income received by a publisher from sales of magazines or periodicals sold directly to consumers, including income from advertising, is subject to the printing and publishing B&O tax classification. This is true when the income is derived from the sales of the paper magazine or periodical (i.e., tangible personal property) or a substantially equivalent digital version. Although the subscription is not taxed differently simply because it is delivered in a tangible or electronic form, subscriptions to a digital version of a periodical or magazine qualify for the printing and publishing classification only when a substantially equivalent tangible subscription is also available.

Substantially equivalent requirement

To be considered substantially equivalent, neither version should provide significantly different content or functionality. For example, a digital magazine that includes a daily supplement that discusses or highlights items of interest to readers, such as summarizing numerous news stories of the day, would not be considered substantially equivalent to a monthly print magazine.

Additionally, if the digital version of a magazine subscription allows the user to access additional or different content, then depending upon the facts, the digital subscription may be considered a digital automated service (DAS). A DAS is a digital product, and income derived from the gross proceeds of such sales would be subject to the retail or wholesale taxes on digital products and services under RCW 82.04.257. Advertising income from such sales would no longer be subject to the printing and publishing classification and would likely be taxed under the service and other activities classification of RCW 82.04.290(2). [1]

Note that this guidance requires the content, not the advertising, to be substantially equivalent, and considers digital magazines or periodicals only. In contrast, if a publisher has digital advertising on its website outside of the context of the digital version of the periodical or magazine, the appropriate tax treatment will be determined by the nature of the advertising. While such advertising is outside of the scope of this interim guidance, note that the advertising may be considered digital media and WAC 458-20-15503 may provide guidance. 

Taxpayer instructions

This interim guidance statement will remain in effect until the Department issues final guidance or cancels the interim statement.