Tax Type
Retail Sales and Use Tax
Description
Custom data lists
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
05-31-1989
May 31, 1989
Re: Request for Ruling: Sales and Use Tax
Dear******************
This will reply to your letter of March 29, l 989, in which you requested a ruling on the application of the tax to your company.
FACTS
*************("The Taxpayer") is in the business of computer processing tax returns and plans to market a new product ("the data list") which will utilize their client data base file. This product involves accessing prior years' tax files and compilation of a customized list of specified data. An example is a list that contains all clients living in a certain city with a taxable income over a certain dollar amount. The end product would be unique to each customer depending upon the specified request and the data list produced would be available only to the customer.
The data list is accessible to the customer in two ways: 1) the data can be viewed on the customer's personal computer through on-line electronic transmission in which a hard copy can be printed by the customer using an in-house printer; and 2) if the customer does not have a personal computer for on-line access to the data list, the Taxpayer will provide the customer with a hard copy of the product. The Taxpayer asks about the specific application of the tax to its business.
RULING
Transactions involving data accessed on-line by personal computer are nontaxable transactions under Virginia Code §58.l-608(2). The transactions in this case are directly analogous to stock quotation reporting services, which are nontaxable under Virginia Regulations 630-10-97.1 and 630-10-101.2, (copies enclosed) .
In addition, hard copies of the customized data list sold by the Taxpayer are analogous to customized mailing lists which have also been deemed not subject to the sales tax under Virginia Code §58.1-608(2). See Commissioner's Ruling dated May 28, 1985 (copy enclosed).
The true object of the sale of the customized data list, whether transmitted by tangible (hard copy) or intangible (on-line) means, is the acquisition of the service of the Taxpayer in producing such a list. Thus, charges for this service are not subject to the tax.
However, if the Taxpayer sells any additional copies of the customized data list to a particular customer, then the Taxpayer is engaging in the sale of tangible personal property and must collect and remit the tax to the department based on the "sales price" of the additional copies. Further, the Taxpayer will be subject to the tax on any tangible personal property used or consumed in Virginia in the rendition of its data service.
Finally, it should be noted that Internal Revenue Code §7216 prescribes both civil and criminal penalties for return preparers who use taxpayer information for any purpose other than to prepare a return. The Taxpayer's activities in this regard may be impacted by these provisions of federal law.
If you have any further questions, please contact us.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner