Laws, Regulations and Annotations


Business Taxes Law Guide—Revision 2024

Sales and Use Tax Annotations

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120.0000 Automatic Data Processing Services and Equipment—Regulation 1502

Annotation 120.0008

(a) In General

120.0008 Annual On-Line Database Contract with Transfer of Publications.
A taxpayer who is an information research firm offers an annual license to an Internet-based financial database. The database resides in a server at the taxpayer's premises, and licensees access it via their web browsers. The annual license fee is $15,500 and includes two publications. There is no separate charge for the publications included with the license but when they are sold separately, the subscription price of these two (together) is $2,995 ($2,495 and $795 for each publication when sold by itself). Also included with the license is the choice of two off-the-shelf reports which sell separately for $750.

The annual license fee is both a contract for the providing of a service (i.e., access to the Internet database) and a contract for the sale of tangible personal property (i.e., the publications and the off-the-shelf reports). As such, tax does not apply to the charges solely for access to the Internet database, which equals $11,755 [$15,500–$3,745 (for periodicals and reports)]. Tax applies to the charges for the publications unless the sale qualifies for the periodical exemption. Finally, tax applies to the gross receipts from the sale of the off-the-shelf reports because the reports are neither periodicals nor custom reports. 9/18/97. (M98–3).