Tax Cybrary

State Summaries

This section provides detailed summaries of state laws in the area of Internet taxation. You can scroll through all the states, or use the selection box below to go right to a particular state.

ALABAMA

Internet Access Charges Internet Access Charges are not subject to the state utility gross receipts tax. In legislation signed by the Governor on May 6, 1998, AL Statute §40-21-80(11)(vi) was amended to specifically state that the term "Computer Exchange Service" shall not include access to the Internet. The amendment is effective 5/6/98.

Source: Alabama Statute §40-21-80

Sales of Goods Purchased Over the Internet
In Alabama, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Alabama’s sales/use tax laws. Source: Alabama Code Section 40-23-2(1)

Information/Software Purchased via Downloading from the Internet
As of March 1, Alabama amended its law to include canned computer software in their definition of tangible personal property, making its sale within the state a taxable transaction. Consequently, whether software is purchased in a retail store or downloaded from the Internet, the transaction is subject to the standard state and applicable local sales and use tax rates in Alabama. Source: Alabama Reg 810-6-1-.37(1) back to top

ALASKA

No state sales tax. Individual localities in Alaska have the right to impose their own tax, and could subject Internet activity to taxation.

ARIZONA

Internet Access Charges
The Department of Revenue has been conducting studies of issues related to the Internet and has determined that Internet access charges are not subject to the transaction privilege (sales) tax, nor are they subject to tax as a telecommunication service.

Source: Department of Revenue reply to Vertex letter

Sales of Goods Purchased Over the Internet
In Arizona, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Arizona’s sales/use tax laws.

Source: Department of Revenue reply to Vertex letter

Information/Software Purchased via Downloading from the Internet
Information or software purchased via downloading from the Internet is subject to the Arizona Privilege/Compensating Use Tax. In terms of who is responsible for reporting the tax to the state, if the seller has nexus within the state, they are required to collect and remit the compensating use tax to the state. If the seller does not have nexus, the consumer by law should self-assess and remit the use the use tax directly to the state.

Source: Department of Revenue reply to Vertex letter

ARKANSAS

Internet Access Charges:
Arkansas does not tax Internet access charges.

Sales of Goods Purchased Over the Internet:
In Arkansas, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Arkansas’ sales/use tax laws.

Source: Arkansas Code: Section 26-52-301

Information/Software Purchased via Downloading from the Internet:
Information downloaded from the Internet is not considered to be a transfer of tangible personal property and therefore not subject to the state’s sales/use tax laws.

CALIFORNIA

Internet Access Charges
Internet access charges are not taxable. California AB 1614 was signed by the Governor on August 24, 1998 and becomes effective 1/1/99. This legislation places a three year moratorium on the imposition or assessment of tax on Internet Access charges or on-line computer services. Also included in the moratorium are the imposition of bit or bandwidth taxes or discriminatory taxes on Internet access or on-line computer services.

Source: CA AB 1614; Statute § 65001 through §65004 of CA Revenue Taxation Code

Sales of Goods Purchased Over the Internet
In California, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and California’s sales/use tax laws.

Clarification on the Effect of CA AB 1614 on
Sales of Goods Purchased Over the Internet:

AB 1614 provides for an amendment to Revenue and Taxation Code section 6203. Section 6203 relates ONLY to whether a retailer is "engaged in business" in California, that is, whether the retailer has sufficient nexus under California law to require the collection of use tax. This section in no way provides an exemption from the otherwise applicable use tax, nor does the amendment added by AB 1614. What the amendment does do is to confirm that a retailer's advertising and taking of orders through an Internet web site is disregarded for purposes of determining California use tax collection nexus. Thus, if the retailer has no other presence in California except for the taking of orders over the Internet, the retailer will not be required to collect use tax from its California customers. In fact, this is not a change in the law going into effect on 1/1/99 because it simply confirms the position previously taken by the Board and incorporated into Regulation 1684.

In any event, the purchasers of the property will still owe the use tax whether the retailer is required to collect it or not. In the latter case, the purchaser remains liable for the tax until it is paid to the Board. The bottom line is that the application of tax to sales of tangible personal property is identical whether the order is placed by mail, phone, or over the Internet. There are no exemptions for sales of tangible personal property by any of these means, including sales of tangible personal property that are the result of orders taken over the Internet, and AB 1614 in no way changes that.

Information/Software Purchased via Downloading from the Internet
Information/Software Purchased via Downloading from the Internet is exempt. Source: California Code Regs § 1502 (f) (1) (D)

COLORADO

Internet Access Charges
Governor Romer signed SB 49 on May 18, 1998, banning the imposition of sales and use tax on direct charges for Internet access services. Additionally, no statutory or home rule jurisdiction may impose any tax, fee or charge on direct charges for Internet access services. Source: Colorado Statute 24-79-102

Sales of Goods Purchased Over the Internet:
In Colorado, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Colorado’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet:
Sales of downloaded software/information are taxable when the purchaser retains a copy of the program or purchases the right to maintain a copy in printed form, digital or other format. If access to the software/information ends when the transmission is completed, the transaction is exempt.

Source: Revenue Bulletin 99-26

CONNECTICUT

Internet Access Charges
Charges for access to the Internet are subject to sales and use taxes as computer and data processing services. These services are taxable in Connecticut if the computer terminal where the benefit of the service is received resides in the state.  Effective 6/30/01, charges for access to the Internet will be exempt.

The service provider is responsible for determining the locations of the subscriber’s computer terminals receiving these services. A flat monthly fee is taxable whether the subscriber actually uses the service or not during a given month.

Effective 7/1/97, the sales and use taxes on computer and data processing services will be phased out over a six year period. The rate in effect from 7/1/97 to 6/30/98 will be 5%, and will decrease each year thereafter by 1% until these services become totally exempt on 7/1/02.

Effective 7/1/97, services rendered in connection with the creation, development, hosting or maintenance of all or part of a web site which is part of the Internet, are excluded from the tax on computer and data processing services. Therefore, these services are exempt from sales or use tax.

Source: Connecticut General Statutes 12-407 (2) (i) (A), 12-408(1)

Sales of Goods Purchased Over the Internet
In Connecticut, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Connecticut’s sales/use tax laws.

Source: Connecticut General Statute 12-407-(2)(a)

Information/Software Purchased via Downloading from the Internet
Effective 7/1/97, the sales and use taxes on computer and data processing services will be phased out over a six year period. The rate in effect from 7/1/97 to 6/30/98 will be 5%, and will decrease each year thereafter by 1% until these services become totally on 7/1/02.

Information downloaded from computers located in Connecticut are taxable as computer and data processing services and therefore subject to these phase out provisions. The sale of customized software is also subject to the reduced tax as a computer service. Canned software is considered tangible personal property and is subject to tax at the full rate when downloaded from a computer located in Connecticut.

Source: Connecticut General Statutes 12-407 (2) (i) (A), 12-408 (1)

DELAWARE

No state sales tax.

DISTRICT OF COLUMBIA

Internet Access Charges:
Effective 7/8/99, D.C. Act 13-111 adds a section of law that defines Internet access services to mean "a service that enables users to access content, information, electronic mail, or other services offered over the Internet".

This same legislation also separates Internet access services from the taxable definitions of sales of data processing and information services and retail sale. Internet access services are exempt as non taxable services. Source: D.C. Law Section 47-2001(n)(2)

Sales of Goods Purchased Over the Internet:
In Washington D.C., sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Washington D.C.’s sales/use tax laws.

Source: D.C. Regulation 475.1, 475.2

Information/Software Purchased via Downloading from the Internet:
Information downloaded from the Internet is considered to be a transfer of tangible personal property by D.C. and therefore subject to the district’s sales/use tax laws.

Source: D.C. Regulation 475.1

FLORIDA

Internet Access Charges
Senate Bill 404 recently became law, and provides that Internet access charges are not considered a taxable telecommunications service and are not subject to sales tax, or any other kind of tax.

One-time set up charges are not subject to tax, and advertising space purchased on a company home page is not taxable. Charges for commercial, residential business and residential non-business use are also subject to the state’s 2.5% utility gross receipts tax.

Sales of Goods Purchased Over the Internet
In Florida, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Florida’s sales/use tax laws. Source: Florida Statute Section 212.05 Information/Software Purchased via Downloading from the Internet If no tangible personal property is transferred with the transfer of information, there is no tax due.

Source: Florida Dept. of Revenue v. Quotron Systems, Inc. et. al.

GEORGIA

Internet Access Charges
Under Georgia law, Internet access charges are classified as a communications service, which are not taxable.

Sales of Goods Purchased Over the Internet
In Georgia, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Georgia’s sales/use tax laws.

Source: Georgia Statute Section 48-8-30

Information/Software Purchased via Downloading from the Internet
Georgia does not consider this a transfer of tangible personal property, and therefore does not consider this a taxable transaction.

HAWAII

Internet Access Charges
Exempt.

Sales of Goods Purchased Over the Internet
These sales are subject to 4% use tax unless the vendor has "substantial nexus" in which case the vendor is subject to the 4% GET.

Source: Department of Taxation reply to Vertex letter

Information/Software Purchased via Downloading from the Internet
Custom software or information is considered an imported service and will be subject a 4% use tax effective 1/1/00. Canned software or information purchased via a download is considered a purchase of tangible goods and subject to 4% use tax on importation of goods.

Source: Department of Taxation reply to Vertex letter

IDAHO

Internet Access Charges
Internet access charges are considered a service in Idaho and are not taxed.

Sales of Goods Purchased Over the Internet
In Idaho, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Idaho's sales/use tax laws.

Information/Software Purchased via Downloading from the Internet
Charges for downloading information or software over the Internet is taxable.

Source: Regulation Rule 35.01.02.027.04

ILLINOIS

Internet Access
Charges Illinois does not impose sales tax on Internet access charges. Based on a recent General Information Letter (GIL), Internet access charges are not subject to Telecommunications Excise tax if the Internet Service Provider does not charge customers for the line or other transmission charges that are used to obtain access to the Internet.

Source: General Information Letter ST-97-0267-GIL

Sales of Goods Purchased Over the Internet
In Illinois, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Illinois’ sales/use tax laws.

Information/Software Purchased via Downloading from the Internet
Illinois does not consider the transfer of information over the Internet as a transfer of tangible personal property, therefore the charges are not taxable. However, as stated in IL Regulation Sec. 130.1935, "canned software is considered to be tangible personal property regardless of the form in which it is transferred or transmitted…". Therefore, charges for downloading software via the Internet are taxable.

Source: IL Regulation Sec. 130.1935

INDIANA

Internet Access Charges:
Indiana does not impose sales tax on Internet access charges.

Sales of Goods Purchased Over the Internet:
In Indiana, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Indiana’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet:
In Indiana, the download of information may result in use tax liability if the transfer of information was canned software. Otherwise, it is not taxable.

IOWA

Internet Access Charges:
Effective 7/1/99 Internet access charges and other on-line computer services are exempt from sales and use tax.

Source: Iowa Code Section 422.45.(55)

Sales of Goods Purchased Over the Internet:
In Iowa, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Iowa’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet:
The sale or rental of canned software is taxable if the program is transferred by storage media.  Retroactive to 3-15-95 and continuing through 12-31-02, tax does not apply to software delivered to the purchaser digitally, electronically, utilizing cable, radio waves, microwaves, satellites, or fiber optics.

Source:  H.F. 2562, enacted into law by the 2000 Iowa General Assembly.

KANSAS

Internet Access Charges
Kansas does not tax Internet access charges.

Sales of Goods Purchased Over the Internet:
In Kansas, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Kansas’ sales/use tax laws.

Source: Kansas Statutes Section 79-3603

Information/Software Purchased via Downloading from the Internet:
Information downloaded from the Internet is not considered to be a sale of tangible personal property, therefore it is not taxable.The sale of software via the Internet is taxable.

Source: Department of Revenue reply to Vertex letter

KENTUCKY

Internet Access Charges:
Kentucky law does not specifically address the taxability of Internet access; therefore, access charges are considered exempt by default.

Sales of Goods Purchased Over the Internet:
In Kentucky, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Kentucky’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet:
Kentucky sales and use tax does not apply to several areas of internet usage.  Fees paid for downloading programs, files, etc., are not subject to tax.

Source: Kentucky Sales Tax Facts, Summer 1998

LOUISIANA

Internet Access Charges
Louisiana does not tax Internet access charges.

Source: Letter Ruling, 6/6/97

Sales of Goods Purchased Over the Internet
In Louisiana, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Louisiana’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet
Information/Software downloaded from the Internet is considered to be a transfer of tangible personal property and is therefore subject to Louisiana's sales/use tax laws.

MAINE

Internet Access
Charges Maine does not apply tax to Internet access charges. Computers are exempt from sales and use tax except for those components of a computer used primarily and directly as a two-way interactive communication device capable of exchanging audio, database, or textual information.

Source: Maine State Law Section 1752, Title 36

Sales of Goods Purchased Over the Internet
In Maine, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Maine’s sales/use tax laws.

Source: Maine State Law Section 1861

Information/Software Purchased via Downloading from the Internet
Maine considers charges for information downloaded from the Internet to be taxable transactions. The state determined that since the process involves the exchange of database or textual information, these charges are subject to state sales tax.

Source: Maine State Law Section 1752, Title 36

MARYLAND

Internet Access Charges:
Telecommunications taxes are not subject to sales tax in Maryland; therefore, Internet access fees are not taxed.

Source: Maryland State Law Section 60-210

Sales of Goods Purchased Over the Internet:
In Maryland, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Maryland’s sales/use tax laws.

Source: Maryland State Law Section 60-210

Information/Software Purchased via Downloading from the Internet:
Information downloaded from the Internet is not considered to be a transfer of tangible personal property and therefore not subject to the state’s sales and use tax laws. However, if any disk-based back-up is provided, the transaction would be subject to the state’s sales and use tax laws.

Source: Maryland State Law Section 60-210

MASSACHUSETTS

Internet Access Charges
On August 29, 1997, Governor Paul Cellucci signed the 1998 Massachusetts budget bill. Included in this bill is legislation that will exclude Internet access charges, web site hosting, electronic mail, bulletin boards and other similar on-line services from the state’s definition of telecommunication services, thereby exempting them from the 5% sales tax on these services. This exemption is retroactive to September 1, 1990 and will continue through to July 1, 1999. Taxpayers who have previously paid tax on these services will be able to apply for a refund or credit back to the September 1, 1990 date, and all audit activity related to Internet service providers will cease.

A special committee has until December 1, 1998 to file a recommendation to make this exemption permanent. If the committee does not recommend that these services become permanently exempt or extend the exemption past the sunset date, then they will become taxable on July 1, 1999.

A refund is now available to all Internet service providers who collected and paid the 5% state sales tax on Internet access charges. The Massachusetts Department of Revenue has begun processing taxpayers' refund requests. The refunds are retroactive to 1990 and will cost the state approximately $14 million in refunds and revenue losses. Source: MA Department of Revenue, August 29, 1997. 

Sales of Goods Purchased Over the Internet
In Massachusetts, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Massachusetts’s sales/use tax laws.

Source: Massachusetts Section 2

Information/Software Purchased via Downloading from the Internet
All transfers of prewritten software on and after April 1, 2006, including but not limited to electronic, telephonic, or similar transfers, downloaded software from the Internet or transfers by “load and leave” are considered transfers of tangible personal property. Sales or use tax will apply when such software is transferred for a consideration to a retail purchaser in Massachusetts or for use in Massachusetts.

MICHIGAN

Internet Access Charges:
Michigan does not impose sales or use tax on Internet access charges.

Sales of Goods Purchased Over the Internet:
Michigan imposes a use tax on the purchaser of goods bought over the Internet when the goods are shipped to an address in Michigan.

Information/Software Purchased via Downloading from the Internet:
Charges for information delivered electronically are not taxable. The state does not consider this to be a transfer of tangible personal property, therefore it is not subject to tax. Canned software, on the other hand, is taxable no matter how it is delivered.

Source: Michigan Letter Ruling 90-6 & Revenue Administrative Bulletin (RAB) 1988-41

MINNESOTA

Internet Access Charges:
Minnesota does not impose sales tax on access charges to the Internet. House Bill 1628 was recently introduced, with a section that would impose tax on Internet access and related on-line services. The sponsoring Representative removed this section from the bill after finding out that the Governor at that time, Arne Carlson, threatened to veto the entire bill if that provision was not removed.

Source: Minnesota Rule 8130.0500

Sales of Goods Purchased Over the Internet:
In Minnesota, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Minnesota’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet:
Minnesota does not apply sales tax to charges made for information downloaded from the Internet because the state does not consider this a transfer of tangible personal property.

Minnesota does apply sales tax to charges for downloading canned software via the Internet. It is the state's position that sales of canned software are taxable, regardless of how it is obtained.

MISSISSIPPI

Internet Access Charges
In a recent test case on Internet access charges, Mississippi determined that Internet access charges are not taxable.

Sales of Goods Purchased Over the Internet
In Mississippi, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Mississippi’s sales/use tax laws.

Source: Mississippi Statute Section 27-65-17(1)

Information/Software Purchased via Downloading from the Internet
Information downloaded from the Internet is considered to be a transfer of tangible personal property and subject to the state’s sales/use tax laws.

Source: Mississippi Statute Section 27-65-17(1)

MISSOURI

Internet Access Charges
Internet access charges are not subject to tax. Recent legislation amends state code to specifically exclude Internet access charges, access to interactive computer services or electronic publishing services from the definition of telecommunications service, therefore exempting them from tax.

Source: S.B. 627, which amends MO Statute §144.010(13)(a)

Sales of Goods Purchased Over the Internet:
In Missouri, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Missouri’s sales/use tax laws.

Source: Missouri Provisions Section 144.020

Information/Software Purchased via Downloading from the Internet:
Information downloaded from the Internet is not considered to be a transfer of tangible personal property and therefore not subject to the state’s sales/use tax laws.

Source: Missouri Provisions Section 144.020

MONTANA No state sales tax.

NEBRASKA

Internet Access Charges:
Nebraska looks at two components of Internet Access: the initial set up of Internet access, and the subsequent flat rate or usage billing for maintained access.

Charges to end users for initial connection to the Internet or an online information service are subject to sales tax when the connection includes computer software. If the Internet service provider furnishes software as part of a connection package or as "free" software, the entire initial charge is taxable. If no software is provided, then sales tax is not applicable.

Flat rate monthly billing or fees based on usage of the Internet are not taxable as they are not considered a "telephone communication service."

Source: Nebraska Revenue Ruling 1-96-1.

Sales of Goods Purchased Over the Internet:
In Nebraska, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Nebraska’s sales and use tax laws.

Information/Software Purchased via Downloading from the Internet:
Sales of data files that are received electronically are not taxable but sales of computer software delivered electronically are subject to tax.

Source: Nebraska Revised Statute §77-2702.07(3); Department of Revenue reply to Vertex letter.

NEVADA

Internet Access Charges
Internet access charges are not taxed.

Sales of Goods Purchased Over the Internet
In Nevada, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Nevada’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet
Charges for information or software downloaded via the Internet are not taxable unless there is tangible personal property transferred as part of the transaction.

Source: Department of Revenue reply to Vertex letter

NEW HAMPSHIRE No state sales tax.

NEW JERSEY

Internet Access Charges
Internet Access Charges are not subject to sales or use tax. Bulletin S&U 10, issued June 1998, clarifies that Internet Access services are not to be included in the definition of "telecommunication services". Therefore, they are not subject to tax.

Source: Bulletin S&U 10, June 1998

Sales of Goods Purchased Over the Internet
In New Jersey, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and New Jersey’s sales/use tax laws.

Source: New Jersey Statute Section 54:32B-3

Information/Software Purchased via Downloading from the Internet
New Jersey does not apply sales tax to charges made for information downloaded from the Internet because the state does not consider this a transfer of tangible personal property.

NEW MEXICO

Internet Access Charges
Internet access charges are subject to New Mexico’s gross receipts tax.

Sales of Goods Purchased Over the Internet:
In New Mexico, sales of tangible personal property over the Internet are subject to the state’s sales/use tax if the seller has nexus OR if the Internet service provider is acting as an agent for the seller, i.e. is involved in order acceptance.

Information/Software Purchased via Downloading from the Internet:
Information downloaded from the Internet is taxable as a data access charge.

Additional Information of Interest:
New legislation in New Mexico deals with the tax situation between ISPs and the utility service providers from which they lease their lines. This does not affect the taxes that are charged to an end-user of Internet services by an ISP, and therefore does not fall within our category of Internet Access Charges above. However, it is useful information that we thought would be worthwhile to include here.

HB 345 was signed by the Governor on March 10, 1998. A sale for resale exemption is now available between a utility service provider and an Internet Service Provider. Therefore, effective July 1, 1998 through June 30, 2000, the gross receipts from providing leased telephone lines, telecommunication services, internet services, internet access services or computer programming may be deducted from the taxable gross receipts of the utility service provider if the ISP is subject to New Mexico Gross Receipts Tax or the Interstate Telecommunications Gross Receipts Tax.

Also approved as part of this bill and effective July 1, 1998:

• A gross receipts deduction is available for "Hosting" (storing information on computers attached to the Internet) World Wide Web Sites.
• A gross receipts deduction is available for sales of tangible personal property or services made through a world wide web site to a person with a billing address outside of New Mexico

NEW YORK

Internet Access Charges
In January 1997, New York announced that effective Feb. 1 Internet access services are exempt from New York’s state and local sales tax. Internet access charges are considered an unremunerated service that is not subject to state sales tax. Also, Internet access is not considered a telecommunications service and, therefore, not subject to the state’s telecommunications excise tax.

In addition to Internet access, items such as communications/navigation software, e-mail privileges, news headlines, and certain web site services were deemed incidental to the provision of Internet access and, therefore, not subject to New York sales tax.

Also, the state determined that nexus with New York is not created by having a non-resident company’s advertising appear on an in-state server or through a New York Internet service provider. This determination applies to both corporate franchise taxes and sales and use taxes.

Source: New York State Department of Taxation and Finance Notice 1/24/97

Sales of Goods Purchased Over the Internet
In New York, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and New York’s sales/use tax laws.

Source: New York Code Section 1105

Information/Software Purchased via Downloading from the Internet
Charges for information downloaded over the Internet are subject to New York sales/use tax.

Source: New York State Department of Taxation and Finance Notice 1/24/97

NORTH CAROLINA

Internet Access Charges
North Carolina does not tax Internet access charges.

Sales of Goods Purchased Over the Internet
In North Carolina, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and North Carolina’s sales/use tax laws. Source: North Carolina Statute Section 105-164.49(A)(1)

Information/Software Purchased via Downloading from the Internet
North Carolina does not apply sales tax to charges made for information downloaded from the Internet because the state does not consider this a transfer of tangible personal property.

NORTH DAKOTA

Internet Access Charges
Sales tax is imposed on Internet access charges -- including fees charged for access to, subscriptions, or memberships in a communication system or network -- provided the communication originates and terminates within the state.

Sales of Goods Purchased Over the Internet
In North Dakota, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and North Dakota’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet
The sale of software or information is a taxable transaction even though it is transferred by remote telecommunications from the seller's place of business to or through the purchaser's computer terminal.

Source: ND Regulation 81.-04. 1-03-11-3a (3) and ND Regulation 81.-04. 1-03-11-3a.(6)

OHIO

Internet Access Charges:
Ohio imposes sales tax on Internet access to businesses as an electronic information service, but no tax is charged to consumer subscribers. The law states that services "provided to businesses when the true object of the transaction is such services" are taxable.

Source: Ohio State Law Section 5739.01(B)3(e) and 5739.014

Sales of Goods Purchased Over the Internet:
In Ohio, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Ohio’s sales/use tax laws.

Source: Ohio State Law Section 5739.02

Information/Software Purchased via Downloading from the Internet:
For businesses, information downloaded from the Internet is taxed as automatic data processing. Downloading by non-business users is not subject to tax.

Source: Ohio State Law Section 5739.01(B))3(e) and 5739.014

OKLAHOMA

Internet Access Charges
Internet access charges are not considered a taxable telecommunications service and, therefore, are exempt from the state’s sales and use tax law.

Source: Statute §710:65-19-156

Sales of Goods Purchased Over the Internet
In Oklahoma, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Oklahoma’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet
Charges for downloading information or software via the Internet are not subject to tax. If, however, the purchaser receives a backup copy of the software or an instruction manual, etc., then the entire charge is subject to tax.

Source: OK Rule 710:65-19-156

OREGON

No state sales tax.

PENNSYLVANIA

Internet Access Charges:
Effective July 1, 1997, Pennsylvania will exempt computer services, including Internet access, from state sales tax.

Source: Pennsylvania Statute 7201(rr)(3)

Sales of Goods Purchased Over the Internet:
In Pennsylvania, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Pennsylvania’s sales/use tax laws.

Source: Pennsylvania State Law Section 201(M)

Information/Software Purchased via Downloading from the Internet:
The Commonwealth Court of Pennsylvania in Graham Packaging Company, LP v. Commonwealth concluded that the sale of all canned software, whether transmitted electronically or on a physical medium, is taxable as the sale of tangible personal property. This is effective for all transactions after October 31, 2005.

Source: Pennsylvania Department of Revenue, PA, Sales Tax Bulletin 2005-04, November 1, 2005.

RHODE ISLAND

Internet Access
Charges Internet access charges are not subject to Rhode Island sales/use tax.

Sales of Goods Purchased Over the Internet
In Rhode Island, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Rhode Island’s sales/use tax laws.

Source: Rhode Island Statute Section 44-18-18

Information/Software Purchased via Downloading from the Internet
Rhode Island does not apply sales tax to charges made for information downloaded from the Internet because the state does not consider this a transfer of tangible personal property.

SOUTH CAROLINA

Internet Access Charges
As a result of the moratorium, the Department will not enforce collection of sales and use taxes from October 1, 1998 to October 21, 2001 with respect to Internet access and electronic commerce as defined in the Internet Tax Freedom Act.

Source: SC Information Letter dated 11/24/98

Sales of Goods Purchased Over the Internet
It is the opinion of the SC Department of Revenue that South Carolina’s sales and use taxes are not similar to a ‘multiple tax’ or a ‘discriminatory tax’ as defined by the Internet Tax Freedom Act. Therefore, the collection or assessment of sales and use tax on sales via the Internet will be treated in the same manner as any other transaction subject to sales or use tax in the state.

Source: South Carolina Information Letter # 99-9, Administrative Pronouncement, 5/6/99

Information/Software Purchased via Downloading from the Internet
Charges billed to a South Carolina subscriber for information downloaded from the Internet are not taxable.

Source: South Carolina Revenue Ruling 96-3

SOUTH DAKOTA

Internet Access Charges
Internet access is taxable as a computer service.

Sales of Goods Purchased Over the Internet
In South Dakota, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and South Dakota’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet
Information/software purchased via downloading from the Internet is considered tangible personal property and, therefore, a taxable transaction if it is a "priced product." If the download is free of charge, then it is not considered a taxable transaction.

TENNESSEE

Internet Access Charges
Effective 1/30/04, the sale of internet access is no longer considered a taxable “telecommunication service”. This change in taxation follows the Tennessee Supreme Court’s decision not to review an appellate court’s ruling in Prodigy Services Corporation v. Ruth E. Johnson, Commissioner of Revenue. The appellate court ruled that Prodigy was not required to collect sales tax on the Internet service it provides.

In conjunction with this policy change, Internet Service Providers may no longer use a resale certificate to purchase telecommunications that are used to provide their customers with access to the internet.

Source: Tennessee Department of Revenue, Sales and Use Tax Notice 04-03

Sales of Goods Purchased Over the Internet
In Tennessee, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Tennessee’s sales/use tax laws.

Source: Response to Vertex letter to state; Tennessee Code §67-6-102(6)

Information/Software Purchased via Downloading from the Internet
Tennessee does not impose sales or use tax to charges made for information downloaded via the Internet. The state does not consider this a transfer of tangible personal property. Software, however, is considered tangible personal property and charges made for downloading software are subject to tax.

Source: Tennessee Code Section 67-6-102(28)

TEXAS

Internet Access Charges
Effective October 1, 1999, the first $25 of a monthly charge for Internet Access Services is exempt.

Source: Texas Code Section 151.325

Sales of Goods Purchased Over the Internet:
In Texas, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Texas’s sales/use tax laws. Texas has interpreted nexus to include servers that reside within the state. For example, if a florist located in Texas takes an order on its Web site, which is hosted on a server in Texas, but delivery is made outside of Texas by a third party, charges for the order are subject to Texas sales /use tax.

Information/Software Purchased via Downloading from the Internet:
Information downloaded from the Internet is taxable as tangible personal property if the server from which the user obtains Internet access is located in Texas.

Source: Texas Tax Policy News, November 1996

UTAH

Internet Access Charges
Internet access charges are not taxable.

Sales of Goods Purchased Over the Internet
In Utah, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Utah’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet
The sale of computer software is taxable tangible personal property regardless of the form in which it is purchased or transferred.

Source: Rule R 865-195-92 (B)

VERMONT

Internet Access Charges
Internet access charges are not subject to Vermont sales/use tax.

Sales of Goods Purchased Over the Internet
In Vermont, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Vermont’s sales/use tax laws.

Source: Vermont Statute Section 9771

Information/Software Purchased via Downloading from the Internet
Vermont does not apply sales tax to charges made for information downloaded from the Internet because the state does not consider this a transfer of tangible personal property.

VIRGINIA

Internet Access Charges:
Internet access is categorized as the electronic transmission of information, which is considered a service in Virginia and is not taxed.

Source: Code of Virginia §58.1-609.5, effective 7/1/98

Sales of Goods Purchased Over the Internet:
In Virginia, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Virginia’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet:
Providing information or software by electronic means is considered an electronic communication service and is not taxable.

Source: Code of Virginia §58.1-609.5, effective 7/1/98

WASHINGTON

Internet Access Charges
Internet access charges are not taxable for sales tax purposes. Signed by the Governor on May 9, 1997, Senate Bill 5763 clarifies the current treatment of Internet service as an "Information Service" and part of the "Selected Business Services Class." Services that fall into this category are not subject to sales and use tax. A new section created by this bill adds a definition of "Internet" and "Internet Service" to §82.04 of the Revised Code of Washington.

This legislation further provides that "no city or town may impose any new taxes or fees on Internet Service providers until July 1, 1999." House Bill 2081 extends the July 1, 1999 date to July 1, 2002.

Source: RCW 82.04.065(2)

Sales of Goods Purchased Over the Internet
In Washington, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Washington’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet
Information or software purchased via downloading from the Internet is subject to the state’s sales and use tax law. In terms of who is responsible for reporting the tax to the state, if the seller has nexus within the state, they are required to collect and remit the compensating use tax to the state. If the seller does not have nexus, the consumer, by law, should self-assess and remit the use tax directly to the state.

Recent legislation has clarified the taxability of canned software that is downloaded via the Internet. Canned software has been added to the definition of "Sale at Retail" and "Retail Sale". Sales of canned software, except for resale, are taxable regardless of the method of delivery to the end user.

Source: RWC 82-04-050(6) & WAC 458-20-193

WEST VIRGINIA

Internet Access Charges:
West Virginia law does not specifically address Internet access; therefore, it is considered exempt from tax by default.

Sales of Goods Purchased Over the Internet:
The sale of tangible personal property on the Internet is subject to the state’s sales tax on electronic data processing, although the Internet is not addressed specifically in the regulation.

Source: Reg. Sec. 110-15-76.2

Information/Software Purchased via Downloading from the Internet:
Information downloaded from the Internet is taxed as electronic data processing. Source: Reg. Sec. 110-15-76.1.3

WISCONSIN

Internet Access Charges:
Wisconsin taxes Internet access charges as telecommunications services subject to sales and use tax, provided the access originates in Wisconsin and the service is billed to a Wisconsin address.

The initial one-time installation or connection fee to access the Internet is also subject to sales tax or use tax provided the access originates in Wisconsin and the service is billed to a WI address.

Source: Wisconsin Statutes 1993-94, Sections 77.51 (17m) and (21m) and 77.52 (2)(a)10

Sales of Goods Purchased Over the Internet:
In Wisconsin, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Wisconsin’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet:
Wisconsin does not apply sales tax to charges made for information downloaded from the Internet because the state does not consider this a transfer of tangible personal property.

Wisconsin does apply sales tax to charges made for canned software downloaded from the Internet because the state deems this to be a transfer of tangible personal property.

WYOMING

Internet Access Charges
Internet access charges are not taxable.

Sales of Goods Purchased Over the Internet
In Wyoming, sales of goods over the Internet are treated the same as sales of tangible personal property through more traditional channels and, therefore, subject to the rules of nexus and Wyoming’s sales/use tax laws.

Information/Software Purchased via Downloading from the Internet
Wyoming does not apply sales tax to charges made for information downloaded from the Internet because the state does not consider this a transfer of tangible personal property.

Wyoming does apply sales tax to charges made for canned software downloaded from the Internet.

Source:  Sec. 39-15-103(a)(i)(A)  

Sign up here for the CyberTax News and receive monthly news updates from Vertex - featuring the latest news and research to hit the Tax Cybrary.