United States

District of Columbia: OTR Issues Guidance on Taxability of Digital Goods

Oct 16, 2017
From KPMG TaxWatch

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In recently-issued Notice 2017-06, the District of Columbia Office of Tax and Revenue provides guidance on the taxation of certain digital goods. Under District law, sales of tangible personal property and specifically enumerated services, including data processing and information services, are subject to sales and use tax. “Data processing services” include computer software and software services, such as system software, application software, computer programming, software modification, and software updating. “Information services” are defined as “information that is gathered, maintained, or compiled and made available to the public or to a segment of industry for consideration.” Historically, D.C. has provided relatively little guidance on the scope of the data processing and information services covered under the statute. Notice 2017-06, however, lists various types of digital goods and states whether or not they are subject to sales and use tax in the District. Notably, canned, prepackaged, and customized software, as well as applications will be taxable as data processing services. The sale of digital news and digital periodicals are taxable as sales of information services. However, sales of digital books, digital music and digital videos are not subject to sales and use tax, as they are not sales of tangible personal property or taxable services. Finally, the notice notes that streaming video services are not subject to sales and use tax, but companies that provide such services will be subject to the ten percent gross receipts tax that applies to distributors of television, video, or radio services to subscribers or paying customers. Please contact Sarika Bakshi at 703-286- 8467 with questions on Notice 2017-06.

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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.