Taxing Tech

A Reed Smith State Tax Blog on the Taxation of Emerging Technologies

Recently, a class of plaintiffs settled with City of Los Angeles over its alleged unlawful collection of telephone utility user tax (UUT). The class alleged that the Los Angeles Municipal Code exempted from UUT all amounts not subject to federal excise tax. The disputed taxes were collected between Oct. 19, 2005 and Mar. 15, 2008. Fighting all the way to the California Supreme Court, the plaintiffs proved that yes, California law allows for tax refund…
Recently, the Montana Supreme Court ruled 5-to-2 that online travel companies (OTCs) were subject to sales tax under the existing sales tax statute. Furthermore, their liability is retroactive to November of 2010. However, the OTCs were not subject to lodging tax. Sales tax is imposed “on the purchaser and must be collected by the seller.” A seller is defined as one who “makes sales” of services. The majority held that the OTCs were providing services…
Recently, a coalition of legislators and advocacy groups prevented the Alabama Department Revenue from imposing sales tax on streaming content.  The Department proposed to amend Administrative Code Rule 810-6-5-.09 to include “digital transmissions.”  The Department’s logic was that the sales tax statute, § 40-12-220(8), defines “tangible personal property” as anything which may be “seen or otherwise perceptible to the senses.”  Furthermore, Department officials recalled that Blockbuster rentals were taxable, and, due to that history, had…
On May 27, Nevada enacted legislation (A.B. 380) that adds click-through and affiliate provisions to its sales and use tax laws.  Click-through nexus is effective October 1, 2015.  Affiliate nexus is effective three months earlier, on July 1, 2015. Under the new click-through nexus law, an out-of-state retailer contracting with Nevada residents whose referrals result in more than $10,000 during the preceding four quarters is presumed to have nexus. The retailer may rebut…
Recently, the Remote Transactions Parity Act of 2015 (“RTPA”; H.R. 2775) has been introduced to the House Committee on the Judiciary.  Its introduction was due to Representative Jason Chaffetz’s (R-UT) promise to replace the Marketplace Fairness Act (“MFA”; died as H.R. 684; reintroduced in the Senate this year as S. 698), to the National Conference of State Legislatures when he spoke to it in December 2014. In general, the RTPA allows states…
Yesterday, the New York Department of Taxation and Finance Office of Counsel issued advisory opinion TSB-A-15(2)S holding that cloud computing vendors providing “Internet infrastructure” were not subject to sales tax.  Taxpayer’s clients provided their own software to taxpayer, which ran that software for client’s purposes. Taxpayer provided hardware at data centers, including memory, processing, and storage, along with non-hardware components, such as operating systems, software development kits (SDKs), application programming interfaces (APIs), and client management…
Recently, Michigan Governor Rick Snyder signed two bills that introduce affiliate and click-through nexus: S.B. 658 (for sales tax) and S.B. 659 (for use tax).  The bills take effect October 1, 2015.  Michigan first considered affiliate nexus in 2011. As we reported, most recently in December 2013, Michigan’s affiliate nexus provisions are similar to those of other states with one exception:  It extends the rebuttable presumption of nexus to one who “sells a…
Recently, the Florida Department of Revenue (“Department”) issued companion advisory opinions 14A19-005 and -006.  The Department found that purchases and rentals of online movies and music are not subject to sales tax.  Furthermore, purchases are also not subject to communications services tax.   However, rentals are taxable as communications services. The taxpayer’s video service allows customers to access video in streaming or downloadable format, or both.  Customers either purchase or rent videos.  Purchasers may keep…
Minnesota exempts webinars from sales and use tax Recently, Minnesota revised Tax Fact Sheet 177, announcing that webinars are tax exempt from sales tax starting July 1, 2014. In order to qualify for exemption, webinars must meet the following requirements: (i) in person presentation’s admission is not taxable; (ii) online participants can interact with presenters during presentation; and (iii) interactive limits if any must be the same for online an in person participants. Washington…
Recently, The South Carolina Department of Revenue (“Department”) issued Private Letter Ruling 14-2 which found that cloud computing and storage services are not subject to South Carolina’s tax on communication services. A non-resident taxpayer requested the Department to determine whether their services are subject to South Carolina’s sales and use tax.  The taxpayer’s services include cloud computing and storage services which provide customers with the ability to process their data with the necessary computing resources.…