May 18, 2015
From KPMG TaxWatch
The Washington State Department of Revenue recently addressed the taxability of the sale of a domain name by a domain name registrar. Domain name registrars sell unique domain names from a domain name registry. Each domain name is assigned a unique Internet protocol address. The Internet protocol address is associated with the website owner’s resource, such as a personal computer or server used to host the website. Under Washington law, a taxable sale at retail includes the sale of digital automated services to consumers. Digital automated services are services “transferred electronically that use one or more software applications.” The Department concluded that because domain name registration services meet this definition, they are generally subject to retail sales or use tax. This conclusion assumes, of course, that the domain name registrar uses computer software applications, and the service is transferred electronically. Further, while the State’s guidance does not specifically address Washington Business and Occupation (B&O) tax, the sale of digital automated services to consumers would likely be subject B&O tax under the retailing classification. For more information on this Washington Tax Topic – Domain Name Registration Services, please contact Steve King at (206) 913-4881 or Michele Baisler at (206) 913-4117.
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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.