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The Company does not charge its customers, and does not collect or pay a sales or use tax on the software developed exclusively by the Company. A sale of canned computer software on a tangible medium is a sale of tangible personal property subject to tax. The Company also transfers canned software that it develops itself on a tangible medium to the customers without separately stating the cost of the software.
Access to the database provided by the Company and the information update service is sold to customers in a twelve-month subscription format. Whether access by the Company's customers to its database through the Internet is a taxable sale or service.2. Taxable telecommunications services are defined as "any transmission of messages or information by electronic or similar means, between or among points by wire, cable, fiberoptics, laser, microwave, radio, satellite or similar facilities but not including cable television. The software at issue is part of the suite of software that is necessary for customers to access the database service.
Whether the provision without charge of canned software that is used to access the Company's database to its customers is a taxable sale. The transmission of software and of periodic updates of information by the Company to its customers through the Internet is not a taxable sale or service.3. A "sale" includes any transfer of title or possession, or both, of tangible personal property and of taxable telecommunications services. Because the transfer of tangible property is not a taxable sale in this case, the Company is considered to be the consumer of the software and is liable for a use tax thereon if no sales tax has been paid. Database access services and sales of information or software over the Internet are not taxable sales or services.
The sale of canned software by the Company to its customers through the Internet is not a taxable sale. The sales of canned software on a tangible medium are taxable, and the sales price subject to tax is the separately stated price of the software.
The Company itself develops the rest of the software suite. The definition formerly excluded Internet access services, electronic mail services, electronic bulletin board services, web hosting services or similar on-line computer services. Despite the change in statutory definition, federal law prohibits Massachusetts from imposing a tax on Internet access and electronic commerce for a three-year period beginning October 21, 1998. Generally, charges for access by telephone or other means to databases stored in computer equipment not on the premises of the customer are not taxable. Charges for the Company's database access service are therefore not a taxable sale.
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You request a letter ruling on behalf of *************** (the "Company"), a World Wide Web based business that provides researched information to customers through the Internet.
You ask whether the information service, which includes access to the Company's database and the transmission of information through the Internet, is a taxable service.
All of your customers' information is stored in a secure, searchable database.
Specified users can access customer information from any device behind a secure login.