Missouri Department of Revenue

Jay Nixon, Governor Alana M. Barragn-Scott, Director

LR 6811
Internet Based Service Not Subject to Sales or Use Tax
June 24, 2011 Dear Applicant: This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated May 4, 2011. The facts presented in your letter ruling request and in conversations with Legal Counsel John Griesedieck are as follows: Applicant plans to offer a new internet-based service (Service). The Service will allow Applicants customers, for a fee, to access business information via the internet about potential or existing customers and suppliers. All of the business information will be housed in Applicants database. Applicants database is located in either New Jersey or Pennsylvania. Core service Applicants core service offering will allow customers to search for and create reports of summary trade data, basic credit scores, legal filings, and general company information. For additional fees, customers will be able to purchase additional data packages or workflow add-ons, which will provide additional data. The additional fees for data packages and workflow add-ons will be itemized in the customers bill. Upgraded data packages Enhanced data package. Applicant will offer an enhanced data package. The enhanced data package will provide access to information about other companies related to the subject entity, graphic or visual charts that summarize the relationship between corporations, and summaries of public filings and financial statements of the subject entity.

Enhanced analytics package. Applicant will offer an enhanced analytics package. The enhanced analytics package will give the user access to corporate monitoring tools, credit limit recommendations, predictions of future corporate success, and fraudprotection data. Enhanced trade package. Applicant will offer an enhanced trade package. The enhanced trade package will include information about weighted averages for past trade payments and historical payment data including the number of delinquent payments and average high credit. SBRI. Applicant will offer small business risk insight, or SBRI as an optional data package. SBRI will allow customers access to financial institutions data on small business lending performance. The SBRI data package will be hosted on Applicants servers, and customers will not install any software on their own computers. International data. Applicant will offer international data. Customers will receive an allocated amount of data that they will be able to access for international entities. When the customer exceeds the allocated amount, he or she will be billed for accessing any additional data. Unlimited data package. Applicant will offer an unlimited data package. The unlimited data package will allow customers access to mix information from the above data packages and will allow customers to generate an unlimited amount of inquiries into Applicants system. Workflow add-ons Decision making tool. Applicant will offer a decision making tool as an optional workflow add-on. The decision making tool will allow the customer to establish rules and approval limits to automate credit decisions, and permit the customer to make immediate credit decisions on new customers. It will be linked into Equifaxs computer system. The decision making tool will be hosted on Applicants servers, and customers will not install any software on their own computers. Account manager. Applicant will offer an account manager as an optional workflow add-on. The account manager will manage the risk of a customers entire customer base by blending the customers credit policy and accounts receivable data with Applicants business information. The customer will be able to load in a set of accounts and rules to trigger labeling for existing accounts. For example, a credit indicator that drops below a set level gets an account flagged for review. The account manager add-on will be hosted on Applicants servers, and customers will not install any software on their own computers.

Collection tool. Applicant will offer a collection tool as an optional workflow add-on. The collection tool will help manage the customers overall risk exposure. The collection tool will enable a user to load in invoice level trade details, and it will provide workflow information related to collection activities. The collection tool will be hosted on Applicants servers, and customers will not install any software on their own computers. Online credit application. Applicant will offer an online credit application as an optional workflow add-on. The online credit application will allow the customer to create customizable credit applications. The application will be displayed on the internet through Applicants servers. The information that is entered into the application will be fed into Applicants program, and Applicant will provide internal automatic alerts when an application is submitted. The online credit application tool will be hosted on Applicants servers, and customers will not install any software on their own computers. Web services. Applicant will offer web services as an optional workflow add-on. The web services add-on will integrate the decision making tool and the account manager tool, each discussed above, and will allow data, decisions, and other account information to be passed back and forth between Applicant and its customers. The web services addon will be hosted on Applicants servers, and customers will not install any software on their own computers.

ISSUE 1:
Are Applicants sales of its core service subject to sales or use tax in Missouri?

RESPONSE 1:
No. Applicants sales of its core service are not subject to sales or use tax in Missouri. Section 144.020.1(1), RSMo, imposes a tax upon the retail sale in this state of tangible personal property and certain enumerated services. Applicants services are not one of the enumerated taxable services under Section 144.020.1. Section 144.610.1 provides that a tax is imposed upon the privilege of storing, using or consuming within this state any article of tangible personal property . . . . The term tangible personal property is defined under the use tax law under Section 144.605(11) as all items subject to the Missouri sales tax as provided in subdivisions (1) and (3) of section 144.020, which includes certain utilities. The sales tax law does not define tangible personal property. The Missouri Code of Regulations, 12 CSR 10-109.050(3)(A), provides in pertinent part that [t]ax applies to the sale of canned programs delivered in a tangible medium which are transferred to and retained by the purchaser. Alternatively, the sale of customized software programs, where the true object or essence of the transaction is the provision of technical professional service, is treated as the sale of a nontaxable service. 12 CSR 10-109.050(1).

Applicants sales of its core service are obtained over the internet and are not transferred via a tangible medium. Thus, whether its core service is considered a sale of a canned computer program or of a customized computer program is of no importance. Either way, the sale of the core service is not subject to tax because there is no transfer of tangible personal property.

ISSUE 2:
Are Applicants sales of its workflow add-ons and data packages subject to sales or use tax in Missouri?

RESPONSE 2:
No. Applicants sales of its workflow add-ons and data packages are not subject to sales or use tax in Missouri. See Response 1, above. This letter ruling is binding upon the Department of Revenue with respect to Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable. Should additional information be needed, please contact Legal Counsel John Griesedieck, General Counsels Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573751-0961), or me. Sincerely, Alana M. Barragn-Scott