Cloud-Based Fax, Messaging and Email Services Taxable in Washington

A business that provides cloud-based fax, messaging, and email services was liable for Washington retailing Business and Occupation (B&O) tax and sales tax because the cloud-based services did not qualify as nontaxable data processing services. The fax and message delivery were performed partly through faxes through communications channels provided by third party communications providers. In Washington, faxing services constitute telecommunicationswhich is subject to the retail sales tax and retailing B&O. The fax and messaging services were not data processing, since the customers’ primary goal was to generate and send personalized transmissions to their own customers, not the extraction or processing of data. The email services were not data processing, since the taxpayer was not hired for the primary purpose of extracting or reformatting customer data. The email services qualified as taxable digital automated services because they used one or more of the taxpayer’s software applications.The taxpayer did not qualify for exemption under the Internet Tax Freedom Act because the taxpayer did not supply email. Rather, the taxpayer offered an email service that uses email provided by third parties. The taxpayer did not qualify for exemption based on storage capacity since it did not provide personal storage used by individual consumers.(Determination No. 14-0307, Washington Department of Revenue, February 29, 2016)

Posted on March 23, 2016