District of Columbia Repeals Sales Tax Exemption for Qualified High Technology Companies

Effective October 1, 2019, the District of Columbia has repealed two sales and use tax exemptions for purchases and sales by Qualified High Technology Companies (QHTC).

Effective October 1, 2019, D.C. has repealed the exemption for purchases by a QHTC of computer software or hardware, and visualization and human interface technology equipment, including operating and applications software, computers, terminals, display devices, printers, cable, fiber, storage media, networking hardware, peripherals, and modems when purchased for use in connection with the operation of the QHTC.

Effective October 1, 2019, D.C. has repealed the exemption for sales within D.C. by a QHTC of intangible property or services, including:

  • Internet related services and sales, including website design, maintenance, hosting, or operation;
  • Internet related consulting, advertising, or promotion services;
  • The development, rental, lease, or sale of Internet-related applications, connectivity, digital content, or products and services;
  • Advertising space and design;
  • Graphic design;
  • Banner advertising;
  • Subscription services;
  • Downloads from databases;
  • Services that involve the provision of strategic advice for Internet use and presence;
  • Internet website design and maintenance services;
  • Internet website assessment and diagnostic services;
  • The use of proprietary content, information, and other services as part of a package of Internet advice and consulting services.

All QHTC Exempt Purchases Certificates issued before October 1, 2019 are terminated as of that date.

The New E-Conomy Transformation Act of 2000 originally created tax benefits for D.C. QHTCs for tax years beginning after December 31, 2000. A QHTC is one which:

  • Is an individual or entity organized for profit
  • Leases or owns an office in D.C.
  • Has 2 or more qualified employees in D.C.
  • Derives at least 51% of its gross revenues earned in D.C. from one or more of certain “permitted” activities and is registered as a business in D.C.

(Act 23-0092 (D.C.B. 23-209), Laws 2019; District of Columbia Tax Changes Take Effect October 1, D.C. Office of Tax and Revenue website, August 26, 2019)

Posted on October 16, 2019