Database Subscriptions Not Taxable in Massachusetts

Subscriptions to a taxpayer’s electronic database are not subject to Massachusetts sales and use tax because the taxpayer is selling database services and not the use of software. The subscriptions are not taxable whether or not they are bundled with additional support or services. The taxpayer’s database allows subscribers to find information about purchasers and suppliers of products. The taxpayer’s software organizes data, extracts relevant information, combines data, and identifies patterns in data. Customers access the database via a website, and no software is downloaded by the customer. The object of the transaction is to access data for the purpose of obtaining information and not to use software. As a result, the subscription is not subject to sales and use tax. (Letter Ruling 14-1, Massachusetts Department of Revenue, February 10, 2014)

Posted on March 31, 2014