SALT Report 1830 – The New Mexico Taxation and Revenue Department issued a revenue ruling regarding the gross receipts received by a Taxpayer who sells various web-based services in New Mexico. For a monthly fee, these services allow subscribers to have remote computer access, participate in meetings online, attend online webinars, hold online training sessions, and provide technical support to their customers.
All of the Taxpayer’s services are provided online or through its website. The Taxpayer does not sell or license any software or tangible personal property to its customers. However, the Taxpayer does provide its customers with a free, downloadable application that allows them to connect to the Taxpayer’s website and access the services. The downloadable application is incidental to the service subscription and is simply used to ensure a secure connection between the Taxpayer’s web services and the customer’s computer.
The Department determined that the Taxpayer’s subscription fees are not a sale of tangible personal property, compute software, services, data access charges, or telecommunications services. However, the subscription fee that is charged is for the right to access the Taxpayer’s website and use the web services provided through the website. In New Mexico, the right “to access and use” is a license and is considered a taxable form of property.
For tax collection purposes, the location of the license is the place where the license will be used. For instance, when customers or their computers are located in New Mexico, the location of the license is in New Mexico. Therefore, any gross receipts that result from the Taxpayers sales of services in New Mexico are taxable.
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