Digital Economy

Subscribe to Digital Economy via RSS

The Texas Comptroller of Public Accounts (Comptroller) took a “members only” approach to determine how revenue derived from website access fees should be sourced to Texas for Texas Franchise Tax apportionment purposes. In Letter No. 201102989L (Feb. 2, 2011), the Comptroller considered the sourcing of revenues derived from a company’s social networking website. The social networking website allowed registered users to pay a flat fee to access the website’s database, publish information, communicate with other users, and utilize and interact with the website’s programs. The Comptroller concluded that such fees were akin to membership fees because customers were charged a flat rate for certain benefits and thus should be sourced to the location of the payor.Continue Reading Texas “Tweets” Guidance on Sourcing Social Networking Website Revenue

The California Court of Appeal held that receipts from Nortel’s license of computer programs used to operate a telephone company’s switch hardware were not subject to sales tax. Nortel Networks, Inc. v. State Board of Equalization, Case No. B213415 (2d App. Dist. Jan. 18, 2011). The court also partially invalidated Regulation 1507 on the grounds that the State Board of Equalization (SBE) had exceeded its authority when it enacted the regulation.

The Court of Appeal’s decision provides guidance regarding the scope of exempt Technology Transfer Agreements (TTA), which are defined as “any agreement under which a person who holds a patent or copyright interest assigns or licenses to another person the right to make and sell a product or to use a process that is subject to the patent or copyright.” Cal. Rev. & Tax. Code § 6011(c)(10)(D); 6012(c)(10)(D).Continue Reading California Court of Appeal Switcheroo: Software Constitutes Technology Transfer Agreement

The New Jersey Division of Taxation is revisiting a proposed regulation that would provide new rules governing the sale of software and related services. While the draft regulation has not been formally published for public comment, the Division is working with interested parties to accept comments prior to the draft’s publication.

The draft would…

On September 15, 2010, the New York State Tax Commission issued an Advisory Opinion, TSB-A-10(40)S, addressing the taxability of various services offered on a professional networking website. The website enables members to create profiles, search for potential contacts, research business opportunities, and participate in discussion groups, among other things. The Commission held that charges…

In City of Eugene v. Comcast of Oregon II, Inc., Case No. 16-08-03280, the Oregon Circuit Court reversed its earlier ruling that the City of Eugene’s registration and license fees imposed on cable Internet access services are preempted by the Internet Tax Freedom Act (ITFA), and that the fees violated the Uniformity Clause of the Oregon Constitution.

This case arose when the City of Eugene filed an action to collect a registration fee and license fee imposed under City Ordinance 20083 from a cable Internet access provider. The registration fee requires each entity engaging in telecommunications activities to register and pay a 2% annual fee on gross revenues derived from providing telecommunications services within the City’s public rights of way. The license fee requires each entity using the City’s right-of-way to provide telecommunications services to pay a license fee of 7% of its gross revenues derived from providing telecommunications services in the city. In an earlier ruling, the Court found that cable modem services (Internet access services delivered using a cable modem) were subject to both the registration fee and the license fee. Upon reconsideration, the Court determined cable modem service was not a telecommunications service under the Ordinance.Continue Reading Oregon Court Holds That Internet Access Services Are Not Telecommunications, Are Protected by the Internet Tax Freedom Act

The goal of the recently introduced Main Street Fairness Act (H.R. 5660) is to establish fairness by treating similar sales transactions equally for purposes of sales and use tax. Opponents of the Bill, however, believe that if it becomes law, the result will be far from fair. The Bill authorizes “member states” of the Streamlined Sales and Use Tax Agreement to impose a use tax collection obligation on remote sellers even though they have not established a physical presence. Those opposing the Bill contend that it will result in extremely burdensome and costly compliance requirements on small, online retailers.Continue Reading Fair or Unfair? Main Street Fairness Act Faces Opposition