United States

Colorado: Charge for Digital Information Subject to Sales and Use Tax

Oct 09, 2017
From KPMG TaxWatch

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The Colorado Department of Revenue recently issued a general information letter addressing whether a taxpayer’s sales of information provided in electronic format were subject to Colorado sales tax. The taxpayer collected information from government entities and sold it to customers. The information, which was not customized for any particular client, was sent electronically and downloaded by the customer.

Under Colorado law, sales tax is imposed on the sale of tangible personal property and specifically enumerated services. The Department first considered whether the sale of electronic information was considered to be the sale of tangible personal property or a service. The Department has previously issued guidance concluding that sales of digital goods, such as music, books, movies, and photographs, were considered to be sales of tangible personal property. The rationale for this determination was that such goods were not merely conceptual, but had a physical existence that could be measured and physically manipulated. Other departmental guidance provided that the sale of reports was considered to be a sale of tangible personal property—rather than the sale of a service—if the reports were not customized for a particular customer. Accordingly, because the taxpayer’s reports were not customized, the Department concluded that the taxpayer’s sale of information delivered electronically was likely subject to Colorado sales tax as the sale of tangible personal property. Please contact Steve Metz at 303-382-7177 with questions on GIL 17-013.

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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.