96-141
Response September 30, 1996
Request
September 10, 1996
XXXXX
Utah State Tax Commission
210 North 1950 West
Salt Lake City, UT 84134
Dear XXXXX,
I am writing to you to request an advisory opinion
regarding taxation of Internet access by XXXXX.
My name is XXXXX, and I am Vice President of XXXXX,
an Internet service provider based in Salt Lake City. We sell dial-up Internet access to customers from Provo to
Ogden. When we incorporated in January
of 1996, we were informed by the Utah State Tax Commission that we were not to
collect sales tax on Internet access purchased by our customers as there was no
such tax at the time. Just to be sure,
I have inquired two times since then and have been told the same thing. I have also checked with other Internet
service providers similar to XXXXX and have found that they are also not
charging sales tax in Utah.
XXXXX purchases its Internet access from a company
called XXXXX, based in Vancouver, WA.
Our connection is made via a physical cable originating at our location
at XXXXX in Salt Lake and terminating at XXXXX location in Salt Lake City at
the XXXXX. For this service we pay
$$$$$ per month. However, XXXXX has
collected taxes on this Internet access as follows:
State Tax: 4.875%
Local Tax: 7.250%
This is a combination of a county sales tax and city
franchise tax
Federal Tax :
3.000%
----------------------------
Total:
15.125%
These are the same taxes that they collect on
telephone service that they sell as well.
It seems that if there is not a Utah State nor Salt Lake City local tax
on Internet access, these taxes should not be collected from XXXXX. Internet access and telephone service are
separate and distinct services. Is the
collection of such taxes on Internet access legal and justified?
If you have questions regarding my request for an
advisory opinion, please contact me at XXXXX.
I have also enclosed a copy of a recent bill from XXXXX. Thank you for your assistance.
Sincerely yours,
XXXXX
Attachments are being stored in the hard file.
XXXXX
Advisory Opinion - Sales tax on purchases by an internet
server.
Dear XXXXX
We
have received your request concerning sales tax charged to your company
for telephone service provided by XXXXX. As a telephone company or telephone service
provider, XXXXX is required to collect sales tax on charges for telephone
service. Therefore, XXXXX’s billings
are appropriate.
You
have correctly noted that your company’s sales of on-line access, is not
taxable. We want to alert you that the Tax
Commission has declined to impose sales tax on charges for on- line services
pending the outcome of a study commissioned by the state legislature. Please watch for legislative action that may
impact your business in the future.
Please
let us know if you have additional questions.
For
the Commission,
Alice
Shearer,
Commissioner