Ruling 2015-5, Sales and Use Taxes, Computer and Data Processing Services

FACTS:

Company charges a recurring fee (monthly or annual) for the ability to stream digital content over the Internet. Company presents this service as a subscription that only provides access to digital content.

ISSUE:

Is the fee subject to Connecticut sales and use tax when the service is sold to a customer located in Connecticut?

RULING:

The fee is subject to Connecticut sales and use tax because the subscription provides the customer with the right to access digital content, and sales of access to digital content are taxable as computer and data processing services.

DISCUSSION:

Connecticut generally imposes sales tax on retail sales of tangible personal property.  Conn. Gen. Stat. § 12-408.  In contrast, sales of services are exempt from sales tax unless specifically enumerated as taxable in Conn. Gen. Stat. § 12-407.  Computer and data processing services are specifically enumerated as being subject to sales and use tax.  Conn. Gen. Stat. § 12-407(a)(37)(A).  Computer and data processing services include “retrieving or providing access to information.”  Conn. Agencies Regs. § 12-426-27(b)(1).  Therefore, services providing access to digital content are taxable as computer and data processing services.    

Company sells its customers a service that only provides access to digital content.  As the sales of services providing access to digital content are taxable as computer and data processing services, the subscription fee is subject to Connecticut sales and use tax when the service is sold to a customer located in Connecticut.

OFFICE OF COUNSEL
November 3, 2015