Utah – Taxability of Web-Based Services and Software

SALT Report 2253 – The Utah State Tax Commission issued a ruling that addresses the sales and use tax treatment of report services, upgraded data packages, and workflow add-ons. The Taxpayer in this case, provides information regarding the financial condition of certain businesses to its customers through a Risk Management Solutions database. The database allows the Taxpayer’s customers to access the business and financial information of a specific business to determine whether the business is a worthy candidate for credit. The Taxpayer’s services are as follows.

Core Service

For a subscription fee, the customer can access business information about potential or existing customers and suppliers through the Taxpayer’s Professional Report service. The Professional Report is an interactive, customizable web-based application that allows customers to run searches and create reports containing trade data, credit scores, legal filings, and general company information.

Upgraded Data Packages

This service includes all of the features of the Core Service package as well as access to data in the form of corporate linkage, visual family tree, public filing information and financial statements. In some cases the customer can opt for a credit monitoring service and detailed payment data for a specific business.

Workflow Add-Ons

This service is separately invoiced from the Professional Report service and upgraded data package. Workflow add-ons include tools to facilitate credit making decisions, a credit account management system, collection tools, online credit applications, and web services that allow data to be passed between the Taxpayer and its customers.

The Commission determined the taxability as follows:

The Professional Report service involves access to both the Taxpayer’s web-based application software and the Taxpayer’s Risk Management Solutions database. The software and the database are designed to work together and are sold for one price.

In this case, the Commission determined that the object of the transaction is the use of the database. The sale of use of the database is not taxable under § 59-12-103 because the use of the database is not a service that is listed as taxable. Further, based on the language in § 59-12-102(122)(c)(iv), providing access to the Professional Report database should be treated as a data processing or information service rather than as a product transferred electronically.

For the Upgraded Data Packages, the object of the transaction was the use of additional data. Therefore, like the Report Services, the upgraded data packages are not taxable under § 59-12-103 because they are not listed as a taxable service.

For sales of the Workflow Add-Ons, the Commission determined that the object of the transaction is the use of the prewritten computer software. In Utah, all prewritten computer software is tangible personal property that is subject to tax under § 59-12-102(118)(b)(v).

For Further Information

Utah State Tax Commission – Private Letter Ruling Opinion #10-012