Internet Does Not Equal No Tax

An online subscription services provider requested the South Carolina Department of Revenue to rule on the taxability of internet-based platforms on which their customers stream videos, listen to music, and play online games. The taxpayer offers subscription services at a standard monthly fee depending on usage amounts and type of package. South Carolina rules that because the subscriptions or services were online activities they are still subject to tax under the communication business class.

Sales tax rules for online transactions and internet-based companies can be confusing. Contact our state and local tax team to make sure you remain in compliance.

South Carolina’s Expansive Treatment of Cloud Computing Services as Taxable Communications

Michael Dillon
Corporate Tax Attorney, Multistate Tax Consultant

In a recent private ruling, South Carolina’s Department of Revenue has again asserted its expansive approach for taxing anything that resembles communications services, including charges for Software As a Service (SAaS) or Platform As a Service (PAaS). [Private Letter Ruling #14-4, South Carolina, (Nov. 4, 2014)] The Department determined that the Taxpayer’s charges for a cloud-based service for processing and routing calls within a customer’s communications system and for other support services constitute “charges for the ways or means for the transmission of the voice or messages”. You can read my summary of the ruling, as well as the entire ruling here…

As more consumers and service providers move to a cloud-based model for providing remote access to hosted operating and application software platforms, as well as hosted storage and computing services, these rulings highlight (1) the growing trend among state taxing authorities to expand the scope of taxable services through administrative rulings, as opposed to legislative or administrative rulemaking processes, and (2) the importance of proactively seeking guidance from the taxing authorities regarding the taxability of cloud computing services.

Shared from LinkedIn’s Sales Tax Café.