Revenue Ruling 01-11-3
Sales and Use Tax

Supersedes Revenue Ruling 01-08-3, issued August 25, 2008


This guidance document is advisory in nature but is binding on the Nebraska Department of Revenue (Department) until amended. A guidance document does not include internal procedural documents that only affect the internal operations of the Department and does not impose additional requirements or penalties on regulated parties or include confidential information or rules and regulations made in accordance with the Administrative Procedure Act. If you believe that this guidance document imposes additional requirements or penalties on regulated parties, you may request a review of the document.

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Beginning October 1, 2008, retail sales of:

are subject to tax when delivered electronically if the products are taxable when delivered on tangible storage media (see Neb. Rev. Stat. § 77-2701.16(9), pursuant to Laws 2008, LB 916). In addition, retail sales of digital codes that provide the purchaser with a right to obtain digital audio works, digital audio-visual works, or digital books are subject to tax. Sales of such digital products are subject to tax when the purchaser receives a permanent right of use, a right of use which terminates on some condition, or a right of use conditioned upon continued payments. This revenue ruling provides the rules relating to the taxability of sales of such digital products delivered electronically.


Digital audio works. Digital audio works means products that result from the fixation of a series of musical, spoken, or other sounds. Products within the definition include recorded or live songs, music, readings of books or other written materials, speeches, and ringtones or other sound recordings. Products which are not within the definition include ringback tones and other digital audio files that are not stored on the purchaser’s communication device or audio greeting cards sent by electronic mail.

Digital audio-visual works. Digital audio-visual works means products consisting of a series of related images which, when shown in succession, impart an impression of motion, together with accompanying sounds, if any. Products within the definition include movies, motion pictures, musical videos, news and other television programs, and live events. Products which are not within the definition include video greeting cards or video or electronic games.

Digital books. Digital books means literary works expressed in words, numbers, or other verbal or numerical symbols or indicia which are generally recognized in the ordinary and usual sense as “books.” The definition includes works of fiction and nonfiction and short stories. The definition does not include periodicals, magazines, newspapers or other news or information products, chat rooms, or weblogs.

Digital code. Digital code means a code which provides a purchaser with a right to obtain one or more taxable digital products delivered electronically. A digital code may be obtained by any means, including email or tangible media, such as plastic cards or certificates imprinted on other products, regardless of its designation as a “song code,” “video code,” or “book code.”

End user. End user means any purchaser of digital goods delivered electronically except a person operating under a certificate from the Federal Communications Commmission (FCC) who receives the contractual right or license to rebroadcast the digital goods to the general public by radio, television, other means, or where an admission is charged.


Sales and use tax applies to sales of digital audio works, digital audio-visual works, digital books, and digital codes relating to such products includes sales to end users who receive a right to permanent use of the product, as well as purchasers who receive less than a right of permanent use. The person must receive the product electronically and download the item to a computer hard drive or electronic storage device. For example:

Sales and use tax on sales of digital audio works, digital audio-visual works, digital books, and digital codes relating to such products applies to end users whose right of use is conditioned upon continued payments. For example:

The sale of a digital code is a taxable event even though the purchaser may exercise the digital code to take electronic delivery of the digital product at a later date. A code that represents a stored monetary value that is deducted from a total as it is used by the purchaser is not a digital code. In addition, a redeemable card, gift card, or gift certificate that entitles the holder to select digital products of an indicated value is not a digital code.

Douglas A. Ewald
Tax Commissioner

August 4, 2011