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WAC 155 Information and computer services.
SOURCE DOCUMENT DETER. NO DATE OF ISSUE DESCRIPTION
WAC: 458-20-155   02/25/13 Repealed : Computer Hardware, Software, and Digital Products

The Department engaged in this rule making to amend WAC 458-20-15501, and adopt two new rules (WAC 458-20-15502 and 15503) to explain the impacts of 2009 and 2010 legislation, and to address other tax issues related to computer hardware, computer software, and computer services below.  WAC 458-20-155 is being repealed.

Chapter 535, Laws of 2009 (ESHB 2075), made major changes to the taxation of certain products and services provided or furnished electronically (commonly referred to as "digital products"). This legislation specifically imposed sales and use tax on digital products such as: Digital goods, including digital audio works, digital audio-visual works, and digital books; digital automated services; digital codes used to obtain digital goods or digital automated services; and remote-access software. The legislation also provided a number of sales and use tax exemptions.
Chapter 111, Laws of 2010 (SHB 2620), clarified ambiguities and corrected unintended consequences related to the 2009 legislation.
  458-20-155   09/20/1985 Information and computer services.
RCW:      
  82.04.040   1961 "Sale," casual or isolated sale."
  82.04.050   1997 Sale at retail," "retail sale."
  82.04.060   07/01/1998 "Sale at wholesale," "wholesale sale"
  82.04.070   1935 "Gross proceeds of sales."
  82.04.120   2003 "To manufacture"
  82.04.190   07/01/1998 Consumer"
  82.04.215   07/01/1998 Definitions
  82.04.290   7/1/93 Tax on selected business services, financial businesses, or other business or service activities. (Effective until 7/1/98)
  82.04.250   1993 Tax on retailers.
  82.04.29001   07/01/1998 Creation and distribution of custom software--Customization of canned software.
  82.04.2907   07/01/1998 Tax on royalties from granting intangible rights. Royalty tax rate is 0.484 percent. "Royalties" means compensation for the use of intangible property, such as copyrights, patents, licenses, franchises, trademarks, trade names, and similar items.
  82.04.440   1994 Persons taxable on multiple activities--Credits.
  82.04.450   1983 Value of products, how determined.
  82.04.4452   07/01/1998 Credit-Research and development spending (Effective July 1, 1998 until December 31, 2004)
  82.04.44525   07/01/1998 Credit--New employment for international service activities in eligible areas--
  82.04.4456   08/01/1999 Credit--software programming or manufacturing.
  82.04.4457   08/01/1999 Credit--Information technology help desk services conducted from rural county.
  82.12.020   07/01/1998 Use tax imposed
  82.12.0284   1983 Use Tax - Exemptions--Use of computers or computer components, accessories, or software donated to schools or colleges.
  82.12.02595   5/1/95 Tangible personal property and certain services donated to nonprofit organization or government entity
  82.32.070   1999 Records to be preserved--Examination--Estoppel to question assessment--Unified business identifier account number records.
  82.63   1/1/95 Tax Deferrals For High Technology Businesses
  82.08.705   2007 Exemption- electronically transmitted financial data
         
       
ETA: 3143.2009 2/2/09 Computer programs: Retail or service
  455.04.155 7/31/73 COMPUTER PROGRAMS: RETAIL OR SERVICE Revised 2/2/09 See ETA 3143.2009
       
INDUSTRY GUIDES:   Sep 2010 Internet-based Businesses cancelled
         
SPECIAL NOTICES:      
Subject Title Reference:      
Software Sales     06/08/1998 Taxation of Computer Software Services and Canned Software Sales or Licensing (Reissued April 2002)
      07/30/1999 Tax Incentives for Rural Counties
Incentives/ International Service Districts     04/23/2000 Questions and Answers about the International Services Districts Business and Occupation Tax Credit
      01/10/2002 Use Tax Obligation of Computer-Related Businesses
Incentives/ Rural County Incentives     05/19/2004 Rural County Tax Incentives: Deferral/Waiver Program Extended & Revised Software Manufacturing, Programming, & Help Desk B&O Tax Credits Reestablished
Incentives 01/09/2014 Exemptions Extended for Certain Purchases by Eligible Data Centers
       
DIRECTIVE: 8155.1   06/02/1988 Software License Agreements Repealed 6/30/2000 - WAC 458-20-155 currently addresses this issue, and the instructions as they apply to periods prior to August 7, 1985, are no longer needed.
         
RPM: None      
         
WTD: 1 WTD 9 86-214   MANUFACTURING TAX -- OUT-OF-STATE SALES OF COMPUTER SOFTWARE -- ESTOPPEL. Manufacturing tax sustained on out-of-state sales of computer software sold under licensing agreements.Taxpayer had listed its income from such sales under retailing taking a corresponding deduction for interstate and foreign sales. Relief not warranted on grounds taxpayer had asked the Department to check its return when it first filed and error in reporting was not corrected or because of the Department's prior position that license to use agreements were professional services. Taxpayer had not relied on the previous position.
  1 WTD 415 85-308A,86-20A   SERVICE B&O TAX -- COMPUTER SERVICES -- ALLOCATION OF COMPUTER SERVICES -- APPORTIONMENT.Amounts derived from allocating computer services between affiliated companies within and outside this state are apportionable based upon the locations where such services are performed, in order to determine Service B&O tax measure.
  3 WTD 333 87-222   RETAIL SALE -- MICROFILM SERVICE -- SOFTWARE.A taxpayer who, for a set monthly charge, sells microfilm updates to pharmacies is engaging in retail sales.The microfilm is not customized software.Rather, it is in the nature of "canned" or "off-the-shelf" software and, thus, a retail sale.
  3 WTD 447 86-250   USE TAX -- INTERVENING USE -- CUSTOM SOFTWARE -- INTERACTIVE COMPONENTS -- INTEGRATED SYSTEM OF COMPUTER HARDWARE AND CUSTOM SOFTWARE.Use tax not due on computer systems and similar electronic hardware which is purchased for resale and becomes part of a final manufactured product, even though the items also are used throughout the development process to store data, develop, test and modify the software that is incorporated into the final product.
  4 WTD 327 87-359   RETAIL SALE -- "CANNED" SOFTWARE -- MODIFICATION OF -- CUSTOM SOFTWARE DISTINGUISHED.Payments for the license to use standard, prewritten software are subject to retail sales tax."Canned" software does not become "custom" software, as that term is used in Rule 155, if the software is adapted to meet a customer's needs and/or because a customer spends a substantial fee to have the software installed.
  4 WTD 327 87-359   RETAIL SALE -- "CANNED" SOFTWARE -- PAYMENT FOR REVISION AND MAINTENANCE OF.Where payment for license to use "canned" software include maintenance and additions or improvements of or to the standard software functions, the total payment is subject toretail sales tax.
  5 WTD 265 88-170   RETAIL SALE -- CREDIT BUREAU BUSINESS -- CHECK GUARANTEE AND VERIFICATION -- INFORMATION SERVICES DISTINGUISHED.A business's check guarantee and reporting service on bank checks for its merchant subscribers and its account screening service for depository customers both fall within the definition of a "credit bureau business" as that term is used in RCW 82.04.050.
  5 WTD 327 88-188   SALES/USE TAX -- TANGIBLE PERSONAL PROPERTY -- EFFECTIVE DATE OF RULE 155 -- COMPUTER SOFTWARE -- LICENSE TO USE.Payments for a license to use computer software were subject to Service B&O tax prior to the amendment of Rule 155, effective August 7, 1985. After that date, such licenses are deemed retail sales subject to Retailing B&O and Retail Sales or Use Tax. Accord: Det. No. 87-359, WTD ____ (1987).
  6 WTD 255 88-303   B&O TAX -- MANUFACTURING -- CONTRACTING WITH OTHERS -- SOFTWARE DISKS AND PACKAGING.The duplicating of software disks and their packaging with documentation into a consumer-useful product results in "a new, different or useful…article of tangible personal property" and is thus manufacturing.
  6 WTD 453 88-382   B&O TAX -- RETAILING -- COMPUTER SYSTEM -- CUSTOMIZED SOFTWARE. Out-of-state taxpayer manufactures telecommunication equipment and the computer system out-of-state to operate the equipment. The taxpayer designs and installs customized software into the computer system which is sold as a complete unit and delivered to a Washington customer.The sale of a computer system with its associated software is subject to Retailing B&O tax. Rule 155.
  7 WTD 43 88-440   USE TAX -- STANDARD, PREWRITTEN SOFTWARE --INCIDENTAL MODIFICATION.Incidental customization of standard, prewritten software does not transform it into custom software.Use tax applies to the use of such software.4 WTD 327 (1987).
  7 WTD 130-1 89-43   RETAIL SALES TAX -- USE TAX -- SOFTWARE -- PROGRAM MODIFICATION -- ALTERATIONS TO CANNED PROGRAM.Payments to an independent, programmer to modify a taxpayer's canned program for the taxpayer's specific use are subject to sales or use tax.
  7 WTD 130-1 89-43   RETAIL SALES TAX -- USE TAX -- COMPUTER TRAINING -- EMPLOYEES -- CANNED PROGRAM.Payments to a vendor of canned computer programs for the training of employees to use those programs are not subject to sales or use tax when separately negotiated and severable from purchase of the canned program.
  8 WTD 5 89-43A   RETAIL SALES TAX -- USE TAX -- SOFTWARE -- PROGRAM MODIFICATIONS -- ALTERATIONS TO CANNED PROGRAMProgramming activities which combine alterations to "canned" programs and the writing of new, one-of-a-kind programs can be segregated for tax reporting purposes.
  9 WTD 51 90-51   RETAIL SALES TAX -- INFORMATION SERVICES -- LIST MAINTENANCE.Charges for "list maintenance" or the imputing, storing, and processing of names into a client's computer data base constitutes "data processing" within the meaning of WAC 458-20-155 (Rule 155). If these services are separately billed, they are not subject to retail sales tax.
  9 WTD 51 90-51   B&O & RETAIL SALES TAXES -- COMPUTER SERVICES -- MAILING LABELS & BULK LETTERS.Charges for sheets of imprinted labels, or bulk customized form letters are sales of tangible personal property, and are properly subject to Retailing B&O and retail sales tax.
  9 WTD 276-1 90-113   USE TAX - COMPUTER SOFTWARE - LICENSE TO USE.Payments for a license to use computer software were subject to B&O tax under the service classification prior to the amendment of Rule 155, effective August 7, 1985.After that date, such licenses are deemed to be retail sales subject to Retailing B&O tax and retail sales or use tax.
  9 WTD 280-1 90-128   INFORMATION AND COMPUTER SERVICES -- FURNISHING TELEPHONE LINES FOR DATA TRANSMISSION -- SERVICE B&O TAX.Charges to customers for "dedicated" telephone lines furnished by taxpayers for use in connection with on-line data processing services rendered by taxpayer are subject to Service B&O tax.Providing telephone lines is incidental to service activity and is not "network telephone service" as defined by RCW 82.04.065 and Rule 245.
  10 WTD 123 90-342   B&O TAX -- SOFTWARE -- PROCESSING FOR HIRE -- 20% RULE.A seller of software who hires third parties to copy diskettes and manual will be deemed the party furnishing the original diskettes and manuals notwithstanding the fact that the originals may have been shipped directly to the third parties by the parent company of the seller.
  10 WTD 123 90-342   B&O TAX -- SOFTWARE -- PROCESSING FOR HIRE -- 20% RULE.In determining if one who employs a processor for hire furnishes more than 20% of the value of the materials or ingredients manufactured so as to be subject to Manufacturing B&O tax, intangible contributions such as the intelligence on an original computer diskette are to be taken into account.
  11 WTD 219 91-177   SALES TAX -- USE TAX -- B&O TAX -- INFORMATION SERVICES-- COMPUTERS -- MAILING LISTS .The computer retrieval and transfer to a mailing bureau of name and address information on magnetic tape for the purpose of printing mailing lists is not a sale of tangible personal property subject to the retail sales tax or use tax.It is an information service, exempt from such taxes.
  11 WTD 547 92-340   B&O TAX - MANUFACTURING - CONTRACTING WITH OTHERS - SOFTWARE DISKS AND PACKAGING.The production of software disks and their packaging results in "a new, different or useful . . . article of tangible personal property" and is thus manufacturing.
  12 WTD 57 92-015   USE AND/OR DEFERRED SALES TAX -- CANNED VS CUSTOM SOFTWARE -- CUSTOMIZED.Where standard, prewritten software is combined with other standard, prewritten software and some original programming, it does not become custom software just because it may be unique or one-of-a-kind. ACCORD: Det. No. 87-359, 4 WTD 327 (1987).
  12 WTD 253 92-393   USE TAX -- LICENSING FEE FOR SOFTWARE -- VALUE OF ARTICLE USED.The use of standard, pre-written software is subject to the use tax if the retail sales tax has not been paid for the software.The value of the software is readily determined by the amount of the lease paid for its use.
  12 WTD 493 92-340   RETAIL SALES -- "CANNED" SOFTWARE -- ANNUAL OR MONTHLY FEES FOR SUPPORT SERVICE, UPGRADES, ADDITIONS, MODIFICATIONS TO CANNED SOFTWARE.A separate package of goods and services purchased to assist in effective use of a "canned" software program is subject to use tax, because the upgrades and modifications are to canned software and are themselves retail sales. This is so, even though the contract is separate from the original canned software purchase and is renewed on an annual or monthly basis either by an action of the taxpayer or by no action followed by payment for the next contract term.
  13 WTD 302 93-158   RETAIL SALE -- USE/DEFERRED SALES TAX -- CANNED VERSUS CUSTOM SOFTWARE -- CUSTOMIZED -- INCIDENTAL MODIFICATION. "Canned" software does not become "custom" software, as that term is used in Rule 155, simply because it is adapted to meet a customer's needs.
  13 WTD 302 93-158   RETAIL SALE -- USE/DEFERRED SALES TAX -- CANNED SOFTWARE -- COMPUTER TELEPHONE SUPPORT SERVICES -- COMPUTER TRAINING -- WARRANTY -- MAINTENANCE --MIXED AGREEMENTS -- SEGREGATION OF CHARGES.Payments to a vendor of canned software for the training of employees are not subject to sales tax if separately stated from the charges for software maintenance.However, charges for maintenance of canned software are subject to use/deferred sales tax. Where payments are not adequately segregated, the combined charge will be subject to use/deferred sales tax.
  14 WTD 191 94-023   SERVICE B&O TAX -- APPORTIONMENT -- COMPUTER SERVICES.Out-of-state corporation may apportion monthly fees it receives from Washington subscribers who pay for the right to access its out-of-state computer facilities in case of failures of the subscribers' own computer systems.The apportionment of gross income is to occur between Washington and other states where it has places of business which contribute to the performance of services rendered in Washington.
  16 WTD 29 95-093   DATA ENTRY -- SELECTIVE BUSINESS SERVICE.Posting raw data from charge slips onto a computer for billing constitutes data entry taxable under the selective business services classification.
  16 WTD 56 95-252   "CANNED" SOFTWARE -- DATABASE -- MODIFICATION.Charges for modifications to standard, prewritten software are retail sales.However, applications written from "scratch" to run with database programs constitute separate custom programs rather than modifications if the original program was not altered.
  17 WTD 112 97-236   B&O TAX CREDITS -- MANUFACTURING -- DISTRESSED AREAS -- INTERNET SERVICES.Merely providing Internet services, such as creating Web pages, without producing tangible personal property for sale, or for commercial or industrial use does not qualify a person for the B&O tax credits program for distressed areas.
  17 WTD 247 98-012   RETAIL SALES TAX -- COMPUTER TRAINING -- DATA RETRIEVAL -- INFORMATION SERVICES.Charges for data retrieval, conversion, and transfer are not subject to retail sales tax if they are separately negotiated and severable from contracts for the purchase of canned software and its installation, in the same manner as training charges.
  18 WTD 74 98-151E   RETAIL SALES TAX -- B&O TAX -- COMPUTER SERVICES -- COMBINED BILLINGS.A computer system company's receipts from billings, which include charges for updates and modifications to "canned software" are taxable under the retailing classification and subject to retail sales tax unless records adequately segregate charges for software and services taxable under the retailing classification from other services normally taxed under other classifications, ACCORD: Det. No. 93-158, 13 WTD 302 (1994); Det. No. 89-43A, 8 WTD (1989).
  18 WTD 285 98-067   B&O TAX -- SELECTED BUSINESS SERVICES; CANNED SOFTWARE TRAINING.Classroom training in the use of canned software is taxable under the service and other activities B&O tax classification, not under the selected business services classification.
  18 WTD 342 98-195   B&O TAXES - SERVICE & OTHER ACTIVITIES - CANNED SOFTWARE - PAYMENTS -- ORIGINAL EQUIPMENT MANUFACTURER.Payments for licensing rights from an original equipment manufacturer to the owner of copyrighted software programs are subject to B&O taxes under the service and other activities tax classification.
  19 WTD 316 98-049R   MANUFACTURING B&O - VALUE OF CANNED SOFTWARE - LEASED - LICENSED -- OUT-OF-STATE.A company that produces canned software in Washington, which leases or licenses the software to out-of-state users is subject to manufacturing B&O tax measured by the gross proceeds of sales, the total realized in lease or license fees from its customers for the software.
  19 WTD 618 99-345   RETAIL SALE -- USE/DEFERRED SALES TAX -- CANNED SOFTWARE -- COMPUTER TELEPHONE SUPPORT SERVICES -- COMPUTER TRAINING -- WARRANTY -- MAINTENANCE --MIXED AGREEMENTS -- SEGREGATION OF CHARGES.Charges for mixed services to canned software are subject to use/deferred sales tax.Software maintenance includes "extended warranty" of installed software; annual software releases to fix "bugs"; new codes, security records, and tables; written documentation on the changes made, including installation instructions; and testing and distribution of system software upgrades.These services include both warranty and maintenance services.Under Rules 107 and 257, mixed agreements are taxed as maintenance agreements, subject to sales or use tax.Where payments are not adequately segregated, the combined charge will be subject to use/deferred sales tax.
  19 WTD 618 99-345   SERVICE B&O TAX -- LEASE VERSUS LICENSE TO USE REAL ESTATE - COMPUTER EQUIPMENT CO-LOCATION SERVICE.Income from providing space for customers solely to locate their equipment on taxpayer's secure premises or to pair the co-location with a range of internet-access services is subject to service B&O tax where the taxpayer retains control over the space and how its customers are permitted to use it.
  19 WTD 771 98-202   RETAIL SALES TAX -SERVICE B&O -- COMPUTER SERVICES - INFORMATION SERVICES -- ON-LINE ACCESS - TELEPHONE LINE CHARGES.Charges for having on-line access to a reservation system are a service activity even though a portion of the charges is for the telephone lines used to convey the information or service to the customer.
  19 WTD 777 98-213   SERVICE B&O TAX -- SOFTWARE -- ROYALTY v. SALES - OEM.Payments made by Original Equipment Manufacturers (OEMs) and resellers for the right to reproduce and distribute copyrighted software programs are "in the nature of royalties" and subject to B&O taxes under the service and other activities tax classification.
  20 WTD 372 00-159E   RETAILING B&O AND RETAIL SALES TAX -- NETWORK TELEPHONE SERVICE -- DEFINITION-- TRUE OBJECT.Where Taxpayer's network provided a computer data protocol conversion service in addition to transmitting data and information over its network to another computer, the true object of the service was found to be the transmission of data and information.
  20 WTD 372 00-159E   SERVICE B&O TAX OR RETAIL SALES TAX -- NETWORK TELEPHONE SERVICE -- INFORMATION SERVICE -- INTERNET SERVICE.The term "internet service" was held to not include a protocol conversion and transmission service that acted upon only the protocols of the transmitted data or information.
  21 WTD 13 01-036   RADIO AND TELEVISION BROADCASTING -- INTERNET.Providing access to pre-recorded programs over the Internet does not constitute radio or television broadcasting because the signal is not delivered over the airwaves.
  21 WTD 13 01-036   CLARIFYING ACT - DEFINITION OF INTERNET SERVICES.When the legislature adopts a clarifying act, the act will apply retroactively.RCW 82.04.297 is a clarifying act, therefore the definition of Internet Services contained therein, applies retroactively.
  21 WTD 13 01-036   AMBIGUOUS STATUTE -LEGISLATIVE INTENT.RCW 82.04.297's definition of Internet Services is ambiguous in that it can be read to have two conflicting meanings.The legislative history shows that the legislature intended one specific meaning.Specifically, Internet Services as defined in RCW 82.04.297 include only those persons who provide access to the Internet, not those who maintain sites on the Internet.
  21 WTD 13 01-036   Wa. Const., art. 2 § 19, RCW 82.04.297:SUBJECT OF BILL.The subject of a bill may not be broader than its title.The title of SB5763, which was codified as RCW 82.04.297, prohibited treating internet service providers as network telephone service providers.Because persons who maintain homepages but do not provide access to the Internet could not have been construed to have provided network telephone services, they cannot be construed to provide Internet Services.
  21 WTD 13 01-036   DEFINITION OF INTERNET SERVICES - CONTEMPORANEOUS CONSTRUCTION.The purpose of RCW 82.04.297 was to ratify the department's treatment of Internet Services.The Department's public statement that RCW 82.04.297 applied to Internet Services Providers is entitled to significant weight.
  21 WTD 258 01-177   RCW 82.04.2907: SERVICE B&O TAX -- SALES OF RIGHTS TO PHOTOGRAPHS. Prior to July 1, 1998, income derived from a transfer or sale of a copyright or other intangible property interest is subject to service B&O tax. Effective July 1, 1998, RCW 82.04.2907 created a special classification for "income from royalties or charges in the nature of royalties for the granting of intangible rights, such as copyrights, licenses, patents, or franchise fees."
  21 WTD 298 00-154ER   RCW 82.04.320: B&O TAX - EXEMPTIONS - RENTALS - LICENSES.The labeling of payments as royalties or rents is not controlling in determining whether the payments are for the rental of real property or for a license or other right involving the use of real property.
  21 WTD 298 00-154ER   RCW 82.04.320: B&O TAX - EXEMPTIONS - RENTALS - LICENSES - MINERAL LEASES.In general, royalties received under a mineral lease are for the grant of the right to extract natural products and are treated as a license, a profit a prendre, or an incorporeal heriditament, not as the rental of real property.
  22 WTD 182 02-0144   RETAIL SALES TAX -- INTERNET SERVICE - WEB-SITE.Fees to access the taxpayer's web-site for retrieval of information are for internet services, which are not telephone services subject to retail sales tax.
  22 WTD 182 02-0144   SERVICE B&O TAX - INTERNET SERVICES - APPORTIONMENT. Charges taxable under the other business or service activities classification for internet services provided from locations in Washington as well as places of business outside the state may be apportioned.
  22 WTD 218 02-0174   B&O TAX - CREDIT - HELP DESK SERVICES TO THIRD PARTIES - INTERNET SERVICE PROVIDER.An internet service provider that provided help desk services to its own subscribers was not entitled to the help-desk services credit under RCW 82.04.4457 because it was not providing those services to third parties.
  23 WTD 121 01-015   USE TAX - COMPUTER TRAINING - SEPARATELY NEGOTIATED AND SEVERABLE.Training costs, of payments to a vendor of canned computer programs for the training of employees to use those programs, are not subject to sales or use tax when separately negotiated and severable from purchase of the canned program.
  24 WTD 102 01-124   ADVERTISING AGENCY - ADVERTISING TEMPLATES - MEDIUM DELIVERED.When an advertising agency "burns" its advertising templates to a compact disc and transfers the compact disc to its client, the advertising agency is selling its advertising services not tangible personal property.The compact disc is just the medium through which the advertising agency delivers its services.Rule 155, concerning computer software, does not apply to transfer of the compact discs.
  24 WTD 269 04-0284   RETAIL SALES TAX - PREPAID CONTRACT FOR HOURS OF UNSPECIFIED SERVICES - REFUND OF RETAIL SALES TAX.A taxpayer who purchases a prepaid service contract for a set number of hours of computer services, under which it may use the hours for either retail or non-retail services, and is charged retail sales tax on the entire sales price, may not obtain a refund of retail sales tax when it actually uses some or all of the prepaid hours for non-retail services.
  24 WTD 393 03-0170   SERVICE INCOME -- ROYALTIES -- INTERNET VENDORS.Income from referring customers to other internet vendors' websites through the use of tabs or links on the taxpayer's internet website and from enhancing the product selection and purchase processes is taxed as service income and not as royalty income.
  27 WTD 51 05-0377   RULE 155, RULE 245; RCW 82.04.065; ETA 544:RETAILING B&O TAX VS. SERVICE B&O TAX -- CLASSIFICATION OF INCOME -- SATELLITE-BASED COMMUNICATION NETWORK -- PRIMARY NATURE -- TRANSMISSION OF DATA FOR HIRE VS. USE OF COMPUTER HARDWARE OR SOFTWARE TO FURNISH INFORMATION OR DATA. In determining the proper classification of a taxpayer's income, we will consider the 'primary nature' of the taxpayer's activities. If the primary nature of the taxpayer's activities was the transmission for hire of data via a telephone network or similar transmission system, including a satellite transmission system, the taxpayer's income would be subject to retailing B&O tax, and the taxpayer would be required to collect retail sales tax from its customers. In contrast, if the primary nature of the taxpayer's activities was the use of computer hardware or software to furnish information or data, the taxpayer's income would be subject to service B&O tax. Where the furnishing of the satellite-based communication network is the "real object" of the transaction, and positioning information is merely incidental to the communication service being rendered, the income is properly classified under the retailing classification.
  27 WTD 61 05-0377R   RULE 155; RULE 245; RCW 82.04.065; ETA 544:RETAILING B&O TAX VS. SERVICE B&O TAX -- CLASSIFICATION OF INCOME - PRIMARY NATURE -TRANSMISSION OF DATA FOR HIRE VS. USE OF COMPUTER HARDWARE OR SOFTWARE TO FURNISH INFORMATION OR DATA.In determining the proper classification of a taxpayer's income, we will consider the "primary nature" of the taxpayer's activities.If the primary nature of the taxpayer's activities was the transmission for hire of data via a telephone network or similar transmission system, including a satellite transmission system, the taxpayer's income would be subject to retailing B&O tax, and the taxpayer would be required to collect retail sales tax from its customers.In contrast, if the primary nature of the taxpayer's activities was the use of computer hardware or software to furnish information or data, the taxpayer's income would be subject to service B&O tax.Although a taxpayer's service may provide some information, this fact does not negate its classification as network telephone service.
  27 WTD 61 05-0377R   RULE 155; RCW 82.04.297:INTERNET SERVICE - ACTIVITIES QUALIFYING AS.Because the primary nature of the taxpayer's activity was network telephone service, its activity was not an "internet service."Internet service includes only those persons who provide access to the internet.In this case, the taxpayer did not provide access to the internet; its customers could simply use the internet to access the data the taxpayer transmitted.
  27 WTD 99 05-0325   RULE 155, RULE 245; RCW 82.04.065; ETA 544:RETAILING B&O TAX VS. SERVICE B&O TAX -- CLASSIFICATION OF INCOME - PRIMARY NATURE-- ELECTRONIC INSURANCE CLAIMS PROCESSING.In determining the proper classification of a taxpayer's income, we will consider the "primary nature" of the taxpayer's activities.If the primary nature of a taxpayer's activities was the transmission for hire of data via a telephone network or similar transmission system, the taxpayer's income would be subject to retailing B&O tax, and the taxpayer would be required to collect retail sales tax from its customers.In contrast, if the primary nature of the taxpayer's activities was information or internet services, the taxpayer's income would be subject to service B&O tax. Taxpayers, who provided electronic insurance claims processing services were providing information services subject to service B&O tax; however, separate charges for telephone lines, and canned software were properly classified under the retail classification and subject to retail sales tax.
  27 WTD 109 07-0120   Rule 155; RCW 82.04.050(6), RCW 82.08.020:RETAIL SALE TAX -- PREWRITTEN COMPUTER SOFTWARE -- MULTIPLE USE LICENSING.Washington imposes sales tax on the retail sale of prewritten computer software that is delivered to the buyer in this state.Sales tax is owed on the selling price of the prewritten software even though the software could lawfully be copied and used simultaneously in more than one state.
  30 WTD 94 10-0333 12/20/2011 RCW 82.04.065; RCW 82.04.297; RCW 82.04.050(5); Title 47 U.S.C. Sec. 151:  INTERNET SERVICE PROVIDER (ISP) – DIGITAL SUBSCRIBER LINE INTERNET SERVICE (DSL) -   An ISP selling DSL internet service is taxable as an ISP.  It should pay Service & Other B&O tax on its income received as an ISP.  For Washington State tax purposes, a DSL ISP’s internet service charges should not be bifurcated into a Service & Other B&O internet service component, and a retailing telephone line transmission component
       
OTHER: