96-132

Response September 29, 1996

Request

XXXXX

August 21, 1996

Commissioner Alice Shearer

Utah State Tax Commission

210 N. 1950 W.

Salt Lake City, UT 84134

Dear Commissioner Shearer:

Thank you for talking with me on the phone last week. As you suggested, I am submitting our sales tax question for an advisory opinion.

XXXXX is a publisher of Utah and Arizona legal materials. We are now developing an Internet site where we will be selling access to on-line information via a subscription. We have two questions to be answered for applicability of sales tax. For the purpose of the two questions, could you indicate if the answer would be different for a purchaser who is a Utah resident and one who is an out-of-Utah resident where both are accessing our service using a computer at their location via the Internet to our computer in Utah.

First, at present XXXXX Web site consists of nearly 12,000 separate files of information. Most of those files are available for access by the public for no charge (the files that are accessible for free are referred to below as publicly accessible documents.) For the subscription fee, a user is given a password which allows the user to submit a search request to be applied to some or all of the publicly accessible documents. Software that is on our site and never downloaded to the user, searches the publicly accessible documents and informs the user of which documents meet the criterion. The user then accesses and reads the publicly accessible documents relevant to the search. If desired by the user, the user may print or copy a file from the publicly accessible documents on his own machine or paper the user has previously purchased. The first question is: is the subscription fee above subject to sales tax.

Second: assuming that part or all of the information ultimately accessed by the user was only available to subscribers who paid the subscription fee, is there a different result?

We would argue that sales tax would not apply to the subscription fee in either case because we are neither selling tangible personal property nor providing a service listed in 59-12-103 as required to be subject to the sales tax in the first place.

Thank you for taking the time to consider this question. We look forward to hearing from you.

Sincerely,

XXXXX

September 29, 1996

XXXXX

Advisory opinion - Application of subscription charges for accessing information via the Internet.

Dear XXXXX

We have received your request for advise concerning the application of sales tax to subscription charges by your company to its customers who access information over the Internet.

You are probably aware that the legislature has commissioned a study to flesh out the tax issues surrounding the rapidly developing and complex field of telecommunications. Pending the outcome of that study, we have declined to impose sales or use tax on on-line services. Therefore, your sales of on-line services are not taxable at this time. Please keep in mind that the tax status of on-line services is subject to change in the future.

Please let us know if you have other questions.

For the Commission,

Alice Shearer,

Commissioner