The Kansas Department of Revenue released a letter ruling on the taxability of online video game products.
The taxpayer sold online video game products in retail stores and online. The ruling discusses sales of access codes, subscription cards, point cards, and notional dollar value cards.
The taxability of access codes depends on whether a video game or a video game add-on is downloaded onto a user's console. Sales of access codes that allow users to access, but not download, video games and add-ons are not subject to tax. The access of software (e.g., video games) is not taxable in Kansas. Access codes that allow a user to download complete video games or add-ons to its console are not taxable upon the initial purchase. However, once the access code is redeemed for downloadable video games or add-ons, there is a taxable purchase of canned software.
Kansas does not tax sales of subscription cards, point cards, and notional dollar value cards that allow users to access online networks that allow gameplay, interaction among other players on a network, access to digital online content, or the direct download of digital content to a consumer's device. Products provided through these cards are not considered to be taxable canned software.
Where these products are purchased - retail location or online store - does not affect how they are taxed.