95-094
Response
December 21, 1995
Request
Ms.
Shearer,
This
is a request for an advisory opinion on taxing Internet service providers. We are an Internet provider offering on-line
services in Salt Lake, Ogden, and Provo.
We have been told by Tax Commission employees that we must charge sales
tax and we have been. However, rumor
has it that this ruling has changed.
Please send us written ruling on whether or not we are suppose to charge
sales tax.
Thank
you for your prompt attention to this matter.
Sincerely,
XXXXX
XXXXX
RE: Advisory Opinion - Application of sales
tax to charges for access to the Internet
Dear XXXXX,
We have
received your request for guidance as to whether you must collect sales tax on
charges for on-line access to the Internet.
As you know, the telecommunications field is developing rapidly. Unfortunately our tax statutes have not kept
pace. For instance, current Utah law
imposes sales tax on charges paid to a telephone corporation for intrastate
phone service, but the law does not specifically address the type of service
you are providing. The legislature has hired
a consultant to review the entire telecommunications field. On completion of the study, the legislature
will consider statutory changes that may impact your business. The study will not be completed in time for
the 1996 legislative session, so you may expect news on these issues some time
after the 1997 legislative session. In
the meantime, we find as follows:
Charges
for on-line access to the Internet are not taxable as phone service. Our conclusion is based on the fact that
your customers' phone services are already taxed by their local phone companies
and long distance carriers.
Additionally, access providers like XXXXX typically provide service
beyond the transmission of signals over a phone line. For instance, XXXXX may set up home pages, e-mail addresses, or
advertising space. In our view, the service that you are selling is
different from intrastate phone service sold by a telephone corporation.
XXXXX
charges for access to on-line access to the Internet are not subject to sales
tax. However, if XXXXX engages in the
sale or rental of computer equipment or "canned software," those
transactions are taxable.
Please
let us know if we can be of further assistance.
For the Commission,
Alice Shearer
Commissioner