Did California sales or use tax apply to fees for creating internet job-listing pages when the company delivered no equipment, software, or printed database information?

Plain-English summary

A company charged customers to post job announcements on its internet and World Wide Web sites. The source did not describe the company's technical processes in detail.

Tax counsel therefore stated the answer through explicit assumptions. The company did not sell or lease computers or software needed to access its database, and it did not give customers printed or other tangible copies of the announcements or resulting web listings. Customers supplied the job announcements, and the company used them to create online pages only.

On those facts, the fee was not subject to California sales or use tax because the company did not sell or lease tangible personal property. The letter warned that a different delivery model would require a different answer.

What this means for you

Online job boards

A fee for creating and displaying an online listing was treated as nontaxable when the transaction stayed electronic and included no sale or lease of equipment or software.

Employers buying listing services

The conclusion depended on receiving only the online service. Tangible reports, software, hardware, or other delivered property could change the analysis.

Accountants and tax professionals

Document what the customer actually receives. The opinion's result rests less on the label "job posting" than on the absence of any tangible-property sale or lease.

Common questions

Q: Were fees for posting a job listing online taxable?

A: No, under the assumptions in the letter.

Q: Did the company provide software to customers?

A: The opinion assumed it did not sell or lease any access software.

Q: What if the company provided printed database reports?

A: The letter expressly assumed no information was delivered in tangible form and said the answer would differ if its assumptions were incorrect.

Q: Did the source decide how a software lease would be taxed?

A: No. It summarized the lease rules but resolved the request by assuming there was no equipment or software lease.

Citations and references

• California Revenue and Taxation Code §§ 6051, 6201, and 6401
• California Revenue and Taxation Code §§ 6006(g)(5), 6006.1, 6010(e)(5), and 6010.1
• California Revenue and Taxation Code §§ 6202–6204
• California Sales and Use Tax Regulation 1660(c)

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 515.0004.450
• Original supporting opinion: 515.0004.450 PDF

Original ruling text

515.0004.450

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION (MIC:82)
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082)
Telephone: (916) 324-2637
FAX: (916) 323-3387

DEAN F. ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
KATHLEEN CONNELL
Controller, Sacramento
___
JOHN CHIANG
Acting Member
Fourth District, Los Angeles
_____

June 25, 1997

E. L. SORENSEN, JR.
Executive Director

Mr. P--- M--I--- H--- R--- S--XXX W. --- --- ---, Suite XXX
--- ---, California XXXXX-XXXX
Re:

Internet and World Wide Web Activities

Dear Mr. M---:
This is in response to your May 15, 1997 letter asking how tax applies to charges for activities undertaken by your company related to the Internet and World Wide Web (WWW). Few facts were provided about your company’s operations. You state that your company developed a job posting website and “Diversilink” on the WWW. We understand that your company charges a fee for posting job listings at these sites. You do not indicate what activities and processes are undertaken by your company in order to post these listing on the Internet and WWW. Discussion California imposes a sales tax on a retailer’s gross receipts from the retail sale of tangible personal property inside this state unless the sale is specifically exempted from taxation by statute. (Rev. & Tax. Code § 6051.) When sales tax does not apply, use tax is imposed on the sales price of property purchased from a retailer for the storage, use or other consumption of that property in California. (Rev. & Tax. Code §§ 6201, 6401.) A lease of tangible personal property in California is a continuing sale and purchase unless the lessor leases it in substantially the same form as acquired and has made a timely election to pay California sales tax reimbursement or use tax measured by the lessor's purchase price of the property. (Rev. & Tax. Code §§ 6006(g)(5), 6006.1, 6010(e)(5), 6010.1, Reg. 1660(c)(2).) When the lease is a continuing sale and purchase because either or both of the foregoing conditions are not satisfied, the lease is subject to use tax measured by rentals payable. (Reg. 1660(c)(1).) The lessee owes

Mr. P--- M---

-2-

June 25, 1997
515.0004.450

the tax and the lessor is required to collect it from the lessee and pay it to this Board. (Rev. & Tax. Code §§ 6202, 6203, 6204; Reg. 1660(c).) We assume from your letter that your company does not sell or lease any tangible personal property to its customers in the course of providing its employment postings on the Internet and WWW. That is, we assume that I--- H--- R--- S--- does not sell or lease to its customers any of the computer equipment or software necessary to access its database, nor provide copies of any of the information from its database to its customers in tangible form. Rather, our understanding is that your company’s customers provide you with job announcements that you use to create job listings on the Internet and WWW and that these announcements and subsequent Internet/WWW listings are not then provided to anyone in tangible form. (If our assumptions are incorrect, our answer would be different.) Under these facts, tax does not apply to your company’s charges to its customers for creating a job listing web page since it is not selling or leasing any tangible personal property. If you have any further questions, please write again. Sincerely,

Warren L. Astleford
Senior Tax Counsel
WLA/cmm
cc:

San Jose District Administrator (GH)