Tax Type
Retail Sales and Use Tax
Description
Web-Based Portal; Text Messaging; Billing Services
Topic
Exemptions
Internet Sales
Records/Returns/Payments
Date Issued
11-29-2012
November 29, 2012
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This reply is in response to your correspondence submitted on behalf of ***** (the "Taxpayer"), in which you request a ruling on the application of the retail sales and use tax to charges for access to a web-based portal, third-party billing services and text messaging.
FACTS
The Taxpayer plans to provide access to a web-based portal that it refers to as cloud computing services. The Taxpayer will provide such access to a reseller of the services. The portal would allow the reseller to maintain a database of its pharmaceutical inventory. The reseller would sell access to the web-based portal to pharmacies. The pharmacies would use the portal to keep track of their patients' prescriptions and doctors' visits, as well as to facilitate remote consultations with the patient.
When the patient visits they pharmacy, the pharmacy would use the web-based portal to verify the patient's information from the primary physician's database. The pharmacy would order the patient's medicine based on the information provided in the database. The pharmacy would also be able to use the portal to monitor the patient's prescription on a periodic basis and make changes to the order as needed.
According to the Taxpayer, it also plans to provide text messaging packages to the reseller for resale to the pharmacies. The text messaging packages would allow the pharmacies to notify its patients via text when prescriptions have been filled.
The Taxpayer also plans to use a third party billing service to bill its customers a monthly fee for access to the portal.
The Taxpayer requests a ruling regarding the taxability of the monthly subscription fee it plans to charge the reseller for access to the web-based portal. The Taxpayer also requests guidance as to the taxability of the billing services and text messaging packages. Additionally, the Taxpayer asks if the application of the tax is based on the location of the computer server, the reseller, the pharmacies or its patients.
RULING
Virginia Code § 58.1-609.5 (1) provides an exemption from the retail sales and use tax for:
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- Professional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made ...and services not involving an exchange of tangible personal property which provide access to or use of the Internet and any other related electronic communication service, including software, data, content and other information services delivered electronically via the Internet.
Web-Based Portal
The Taxpayer states that it plans to provide access to a web-based portal via the Internet. Based on Taxpayer statements, no tangible personal property will be provided with the access services. Therefore, in accordance with the foregoing statute, the monthly subscription fee for access to the web-based portal is not subject to the tax. As the subscription fee is exempt, the location of the Taxpayer's computer server, the reseller, the pharmacies or its patients does riot affect the taxability of these fees in Virginia.
Billing Services
The Taxpayer will use a third-party biller to process the Taxpayer's billing information and submit monthly bills to the reseller. The billing provider may submit bills to the reseller as paper bills or via the Internet. Although paper bills may be issued, pursuant to Title 23 of the Virginia Administrative Code 10-210-4040, the true object of the Taxpayer's purchase is to obtain services that produce bills that are unique to each customer. Based on the facts presented, I find such services to be exempt of the tax. As these services are exempt, the location of the Taxpayer's computer server, the reseller, the pharmacies or its patients does not affect the taxability of these services in Virginia. See Public Documents 08-128 (7/29/08), 97-65 (2/13/97) and 96-88 (5/14/88).
Text Messaging
The Taxpayer also requests a ruling on the application of the tax to the text messaging packages it will provide to the resellers. Several attempts have been made by a member of my staff to obtain additional information from the Taxpayer regarding this issue. Because no additional information has been provided, I am unable to issue a ruling regarding the application of the retail sales and use tax or the communication sales and use tax to such transactions.
The Code of Virginia section, regulation and public documents are available online at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's website. If you have any questions about this ruling, you may contact ***** in the Office of Tax Policy, Appeals and Rulings at *****.
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- Sincerely,
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Craig M. Burns
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- Tax Commissioner
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AR/1-4947026267.M
Rulings of the Tax Commissioner