United States

Connecticut: Subscription Charges for Online Streaming of Digital Content Taxable as Data Processing

Nov 16, 2015
From KPMG TaxWatch

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The Connecticut Department of Revenue recently addressed whether a recurring subscription fee for the right to stream digital content over the Internet is subject to Connecticut sales and use tax. Under Connecticut law, computer and data processing services are specifically enumerated as subject to sales and use tax at a reduced one percent rate. Computer and data processing services are defined in Connecticut regulations, in part, as “retrieving or providing access to information.” Previously, the Department had issued guidance that “digital downloads,” such as books, games, music, and videos are subject to tax as data processing services; however, the Department had not specifically addressed the taxability of access to online streaming of digital content. In a recent ruling, the Department stated that services providing access to digital content, including the ability to stream digital content, are taxable computer and data processing services. As a result, a subscription fee to access streamed digital content is subject to Connecticut sales and use tax at a rate of one percent when sold to a customer located in Connecticut. For more information on Connecticut Ruling No. 2015-5 (Nov. 3, 2015), please contact Stephen Kralik at (860) 297-5431.

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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.