New Jersey has issued a bulletin addressing the application of sales and use tax to the sale of cloud computing. Cloud computing falls under one of three categories: Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS). Cloud computing is separate from the purchase of downloaded or otherwise electronically delivered software, which is taxable as the sale of tangible personal property unless the business use exemption applies. Additionally, sales and use tax is imposed on information services, regardless of the fact that such services may meet the above description of cloud computing. New Jersey has determined that in all three cases, the nature of the transaction is the provision of a service which is not taxable in the state. Because software is not transferred to the customer, it is not deemed to be the delivery of software. Under a Saas agreement, if the software is accessed and used as a tool for providing information to customers by an information service provider, then these charges are deemed taxable information services. Under an IaaS contract, the use of hardware is not considered a rental since transfer of possession did not occur. The provider should pay tax on all purchases of equipment, software and other services such as utilities and telecommunications even if separately invoiced to the customer. These charges are not taxable when charged to the customer even if specifically itemized on the invoice.
Sellers may provide space on their server to their customers to store data. This service is called data hosting. Data hosting services are not subject to sales tax as they are not specifically listed as a taxable service.
Webhosting services include creative services, graphics, computer coding, web traffic management, website security, and server space to house a website. Webhosting services are not subject to sales tax as they are not specifically listed as a taxable service. (Technical Bulletin TB-72, New Jersey Division of Taxation, July 3, 2013)