Tax Type
Retail Sales and Use Tax
Description
Taxation of online services
Topic
Collection of Tax
Payment and Refund
Date Issued
07-25-2002
July 25, 2002
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter of April 17, 2002, in which you request a ruling concerning the application of the retail sales and use tax to charges for accessing information made by ***** (the "Taxpayer").
FACTS
The Taxpayer charges a monthly flat fee and a per minute usage fee to allow its clients to connect to a computer located in to access information on the location of automobiles and automobile parts. No tangible personal property is exchanged under these transactions. The clients are not provided data on tape or disk, but merely use their computers to access and view data from the database.
You suggest that sales tax is not applicable to the monthly flat fee and a per minute usage fee charged by the Taxpayer to its Virginia customers.
RULING
Code of Virginia § 58.1-609.5(1) provides an exemption from the retail sales and use tax for:
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- Professional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made; services rendered by repairmen for which a separate charge is made; and services not involving an exchange of tangible personal property which provide access to or use of the international network of computer systems commonly known as the Internet and any other related electronic communication service.
The Taxpayer's services are accessed by customers online, and the automotive information is provided in electronic form. Because these transactions do not involve the exchange of tangible personal property, they constitute nontaxable service transactions exempt under Code of Virginia § 58.1-609.5(1). Accordingly, the Taxpayer is not required to collect the Virginia sales tax on the flat monthly fees and per minute usage fees charged to its clients for information access services.
In the event the Taxpayer provides products in tangible form (i.e., compact disc, diskette, tape, etc.), a taxable sale of tangible personal property would occur. This is consistent with prior rulings of the department which distinguish between information provided electronically or in tangible form. The tax would also apply when tangible personal property is provided in connection with software products sold in electronic form to Virginia customers. See Public Documents 95-68 (3/30/95) and 97-405 (10/2/97).
The department will issue a refund of erroneously collected sales tax only if the dealer can show that the amount erroneously collected has been refunded to customers or credited to their accounts. A request for refund must be made within the three year statute of limitations. See Title 23 of the Virginia Administrative Code 10-210-3040 for a further discussion of sales and use tax refunds. Refund requests may be made to the department's Office of Customer Services, Post Office Box 1115, Richmond, Virginia 23218-1115. The Office of Customer Services maybe reached at (804) 786-3110.
Code of Virginia, regulations and public documents are cited for reference purposes. These and other reference documents are available online in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us.
If you have any questions about this ruling, you may contact ***** in the department's Office of Policy and Administration, Appeals and Rulings, at *****.
Sincerely,
Kenneth W. Thorson
Tax Commissioner
AR/40341R
Rulings of the Tax Commissioner