Tax Type
Retail Sales and Use Tax
Description
Services, professional or personal; Internet
Topic
Taxability of Persons and Transactions
Date Issued
04-30-1997
April 30, 1997
Re: Request for Ruling: Retail Sales and Use Tax
Dear************************
This will reply to your letter in which you seek a ruling on the application of sales and use tax to Internet services provided by ************* (the "Taxpayer"). I apologize for the delay in responding to you.
FACTS
The Taxpayer provides various services over the Internet to the earth science community including mailing list management, Internet site provision, and communication service management. The Taxpayer wishes to know if charges for the Internet services it provides are subject to sales and use tax.
RULING
Code of Virginia § 58.1-609.5(1) provides an exemption for "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made..." Title 23 of the Virginia Administrative Code (VAC) 10-210-4040 (copy enclosed) addresses the application of sales and use tax to services. Generally, charges for services are exempt from sales and use tax unless the service is provided in connection with the sale of tangible personal property. The department has traditionally held that transactions involving data accessed on-line by personal computers are nontaxable service transactions. Such transactions include the transfer of information via fax, Internet, or other electronic means. Unless provided in connection with the sale of tangible personal property, intangible property or services generally are exempt from the tax.
Based on the information provided to a member of my staff over the phone, the Taxpayer's services of mailing list management, Internet site provision, and communication service management are provided over the Internet and do not involve the provision of tangible personal property. For this reason, the Taxpayer is providing professional services that are exempt from sales tax. I have enclosed copies of Public Documents 97-117 (3/6/97), 89-179 (5/31/89), and 88-299 (10/31/88) to illustrate our longstanding policy on services provided electronically and through the use of personal computers.
Paragraph E of Title 23 VAC 10-2104040 provides that "[a] service provider is the taxable user and consumer of all tangible personal property purchased for use in providing exempt services." As a service provider, the Taxpayer should pay sales tax to its suppliers at the time of purchase. If a supplier is not registered to collect sales or use tax, the Taxpayer is responsible for reporting and paying use tax on a Consumer's Use Tax Return, Form ST-7. The Taxpayer may set up a consumer's use tax account so that it may pay the use tax on any untaxed purchases used and consumed in Virginia by contacting the department for forms and instructions.
I trust the information provided has addressed your concerns. If you need additional assistance, or wish to set up a consumer's use tax account, please contact******** in the Office of Tax Policy at******** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11428S
Rulings of the Tax Commissioner