Feb 22, 2016
From KPMG TaxWatch
The Director of the Arizona Department of Revenue recently affirmed an Administrative Law Judge (ALJ) decision holding that a taxpayer was subject to personal property rental transaction privilege tax on receipts from providing access to an online research database. The personal property rental transaction privilege tax is imposed on the gross income of a business derived from leasing or renting tangible personal property. The taxpayer at issue sold access to an online research database on a subscription basis. Subscribing customers could independently browse the database, run searches for information, download and print articles, and create flowcharts and spreadsheets. Following an audit, the Department assessed state and city transaction privilege tax on the taxpayer’s subscription income from Arizona customers. After an ALJ upheld the assessment, the Director of the Department of Revenue agreed to review.
The Director observed at the outset that the taxpayer provided access to an online research library and that this access was made possible by software hosted on the taxpayer’s servers.
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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.