Laws, Regulations and Annotations


Business Taxes Law Guide – Revision 2023

Sales and Use Tax Annotations

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120.0000 Automatic Data Processing Services and Equipment—Regulation 1502

Annotation 120.0005

(a) In General

120.0005 Accessing of Database. An out-of-state person requested information regarding the application of sales and use tax to the following transactions:

(1) A resident of California uses the computer and calls an on-line data service. The individual searches the database, reviews the results on the screen and takes handwritten notes. Assuming the database provider charges for the search, is any sales or use tax due?

(2) The access and search are identical to (1) except that the results are downloaded into the individual's local terminal and either printed out on the individual's printer or saved to a diskette. Is any sales or use tax due?

In both transactions, the database operator provides electrical signals which contains the information sought by the user. Since no tangible personal property is transferred to the user and the database operator performs no fabrication of tangible personal property supplied by the user, no sales or use tax applies.

(3) The access and search are identical to (1) except that the completed information is printed out by the database operator and mailed to the individual. Is any sales or use tax due? Does it matter if the database provider resides in or out of state?

Where a database operator provides information in response to the unique request for information from the user, the operator is providing a service. Since the operator is regarded as the consumer of that property, neither sales nor use tax applies to the transfer. If the operator consumes the property in California, use tax applies to the operator's use of that property measured by the operator's cost of the property unless the operator has already paid sales tax reimbursement to its vendor when purchasing that property.

(4) Does the taxability of these transactions change if the state resident dials (a) an 800 number, (b) an out-of-state number, or (c) an in-state number?

Since these transactions are not sales, this question is not relevant. However, this factor would not alter whether a transaction is subject to tax or not. 9/21/90.