Is a company that maintains a Material Safety Data Sheet (MSDS) database and prepares regulatory compliance reports, permits, and transport documents making taxable sales of tangible personal property, or providing nontaxable services?

Plain-English summary

A company maintains a database of Material Safety Data Sheets (MSDS) — the chemical-hazard documents used to comply with safety and transportation rules — and wraps it in services: an emergency hotline to report a spill or plant accident, and preparation of the reports, permits, and shipping documents clients need to transport hazardous materials. It asked whether any of this is subject to Colorado sales or use tax. The Department gave a true-object analysis but made no determination.

The framework: Colorado taxes sales of tangible personal property, not services. A digital MSDS is tangible personal property — the Department, like most states, treats digital goods (even an electronically delivered reference document) as taxable property, "not merely conceptual in nature." But a transaction that includes such property can still be a non-taxable service when the "true object" of the deal is the service. The Department's example: a custom market-survey report prepared for a single customer is a service even though a tangible report changes hands; the same report sold to multiple customers is a taxable sale of property.

Applying that here, the Department listed several factors pointing toward service: clients engage the company primarily to ensure compliance with government reporting, permitting, and regulatory requirements, and the Department is "inclined" to treat the creation of reports and completed governmental applications as a service. Running a hotline/call center is generally a service. The transport-related regulatory and permitting work also looks like a service — and even if the company hired the carriers (it doesn't; clients do), transportation services are presumptively non-taxable (Special Regulation 18). Pricing structure matters too: hourly rates and separately priced labor suggest a service.

The counterweight: if clients engage the company primarily to obtain access to data, without significant analysis, the MSDS starts to look like a taxable digital product — a reference manual. Because the Department hadn't reviewed how perfunctory or substantive the underlying work was, it would not decide.

What this means for you

Data, compliance, and reporting businesses

Selling access to a document database leans taxable (digital reference material); wrapping data in genuine professional work — analysis, permitting, regulatory filing, emergency response — leans non-taxable service. The line is the true object: what is the customer really paying for? Build and price your offering so the dominant value (and your invoices) reflect the service, if service is what you're actually delivering.

How you bill is evidence

The Department treats hourly rates and separately priced labor as signs of a service, while a flat per-document price looks more like selling a product. Itemization and pricing aren't just billing mechanics — they're part of the taxability analysis.

Accountants and tax professionals

This is a classic true-object case (GIL-07-027 lineage): digital goods are TPP, but a service true-object converts the whole transaction. The unresolved fact was the depth of analysis — pure data access (taxable manual) versus substantive compliance work (service). A hotline/call center is a service; transportation services are presumptively exempt (SR-18). No determination here; a binding answer needs a private letter ruling under Reg. 24-35-103.5.

Common questions

Q: Is a Material Safety Data Sheet taxable in Colorado?
A: A digital MSDS by itself is tangible personal property and can be taxable, like a digital reference manual. But if it's delivered as part of a transaction whose true object is a service — regulatory compliance, permitting, emergency response — the whole transaction may be a non-taxable service. The Department didn't decide which side this company fell on.

Q: What's the deciding factor?
A: The "true object" of the deal. If customers mainly buy access to data with little analysis, it looks like a taxable digital product. If they mainly buy compliance work (reports, permits, hotline response), it looks like a service. Pricing (hourly vs. per-item) and the amount of analysis the company performs are key evidence.

Q: Is running a compliance hotline taxable?
A: Operating a call center is generally a service. The Department said this company's hotline — which lets clients report emergencies and triggers the regulatory-response work — looks like a service, though it made no determination.

Q: Can I rely on this letter?
A: No. This is a General Information Letter — a general good-faith discussion that makes no specific determination and binds no one. For a binding answer, request a private letter ruling under Reg. 24-35-103.5.

Citations and references

Statutes:
- § 39-26-104(1)(a), C.R.S. — sales tax applies to tangible personal property, not to services

Department guidance referenced:
- GIL-07-027 (12/04/2007) — custom data compilations treated as services
- Special Regulation 18 (Transportation Services) — transportation presumptively non-taxable
- Reg. 24-35-103.5 (general information letters vs. private letter rulings)

Related Colorado rulings (true object / digital goods vs. services):
- [[gil-13-020-electronically-delivered-software]]
- [[gil-15-025-digital-photographs]]
- [[gil-16-015-credentialing-services]]
- [[gil-15-009-services-in-connection-with-retrieving-and-copying-medical-records]]
- [[plr-16-003-billing-services]]

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-13-022.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL-13-022
October 2, 2013

xxxxxxxxxxxxxx
xxxxxxxxxxxxxx
xxxxxxxxxxxxxx

Re: Material Safety Data Sheet
Dear XXXXXXXXX,

You submitted a request for guidance to determine the applicability of Colorado sales
and use tax on the sale of Company's product.
The Colorado Department of Revenue ("Department") issues general information letters
and private letter rulings. A general information letter provides a general overview of the
relevant tax issues and is not binding on the Department. A private letter ruling provides a
specific determination for a specific set of facts, is binding on the Department but not on the
taxpayer, and requires payment of a fee. For more information about general information
letters and private letter rulings, please see Department regulation 24-35-103.5 at
www.colorado.gov/revenue/tax > Tax Library > Rulings.
The Department initially treats your request as one of a general information letter. If you
would like the Department to issue a private letter ruling on the issues you raise, you can
resubmit a request and fee in compliance with regulation 24-35-103.5. It is important to
remember that general information letters, such as this one, are general discussions of tax
law and are not a determination of the tax consequence of any particular action or inaction.
Issue
Is the Company engaging in transactions that are subject to Colorado sales or use tax?
Background
Company maintains a database of XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx.
Company provides several services that respond to specific customer needs, such as a
hotline that provides immediate contact with XXXXXXXXXXXXXXXXXXXX to report a
XXXXXXXXX or plant accident. Company also prepares all the necessary XXXXXXXXXX
XXXXXXXXXX and XXXXXXX required to transport XXXXXXXX. Company does not
engage a transportation company on behalf of their client. Company provides these
services through the use of web application.
There are no servers or offices located in Colorado, but Company has an employee that
works and resides in Colorado, and assists in the solicitation of the product.
Company represents that there is no transfer of tangible personal property to clients
and is not downloading software to clients.
Discussion
The Department does not have a regulation or publication that specifically addresses your
inquiry. The following is a general discussion of the tax issues surrounding your request. If
you would like a specific ruling on the issues you raise, you can request a private letter
ruling by submitting a request and fee in compliance with Department Regulation 24-35103.5.
Colorado levies sales tax on the sale, use or rental of tangible personal property, but
not on the sale of services.1 Tangible personal property is corporeal property, which is
property that is part of the physical world. The Department, as well as the majority of
other states, treats digital goods, such as digital books as tangible personal property
because these goods are not merely conceptual in nature. Thus, a book or reference
material may constitute a digital good, even if electronically delivered to the customer.
Even though a digital product, such as the MSDS, is tangible personal property, the
transaction may, nevertheless, be treated as a non-taxable service if the "true object"
of the transaction is the provisioning of a service. For example, custom-made
compilations of data, such as a market survey report prepared for a single customer,
are generally treated as a service, even though the seller may provide tangible
personal property in the form of a report to the client.2 On the other hand, if the same
report is sold to multiple customers, then providing such reports will generally not be
treated as a service and will be treated as a taxable sale of tangible personal property.
The Department cannot determine in the context of a general information letter whether
the MSDS and other charges are taxable. There are a number of factors that suggest
Company is providing a service. Company represents that the principal reason clients
engage Company is to ensure compliance with government reporting, permitting, and
1
2

§39-26-104(1)(a), C.R.S. You can view statutes on the Department's web site at
www.colorado.gov/revenue/tax > tax library > statutes.
Colorado General Information Letter GIL-07-027,12/04/2007. You can view this ruling at
www.colorado.gov/revenue/tax > Tax Library > Rulings> Topic by Number.

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other regulatory requirements. Our inclination is to treat transactions to create reports
and completed applications for governmental regulatory compliance activities as
services. However, we have not reviewed the governmental reporting and application
process to have a sense of whether this is a perfunctory process or something
approaching a service. Company represents that it may also engage in some analysis
of the use of XXXXXXXXX in the client's enterprise. This analysis may involve sending
Company employees to the client's facilities. However, it is not clear when and under
what circumstances this analysis is done. If clients engage Company primarily to
obtain access to data, without any significant analysis of the data by Company, we
would be more inclined to treat the MSDS as a taxable digital product, much like a
reference manual. Finally, the pricing structure (e.g., whether and how various
activities or products are priced) can influence how the transaction is characterized
(e.g., hourly rates are indicative of a service; separately priced labor and product
charges suggest a sale of services and of goods, etc.).
Operating a call center is generally considered a service. Company's description of its
hotline suggests that it is similar to a call center. Company's hotline allows clients to
contact Company to report an emergency and, importantly, initiates the process within
the Company to prepare and issue the necessary reporting and other regulatory
compliance activities. Again, we generally view reporting and application activities as
services, even though some tangible personal property may be generated from such
activities. Although we make no determination here, we understand that Company,
itself, is not providing any of the intrastate telecommunications services and is not a
reseller of such.
Finally, Company performs a variety of activities relating to governmental reporting,
permitting, and other regulatory activities that are necessary for the transportation of
XXXXXXXXXX. Company, itself, does not engage in the hiring of transportation
companies; such engagements are left to the client to procure. Company's activities
here appear to be more accurately described as services than as the sale of tangible
personal property (e.g. completed applications for governmental permits). Even if
Company did engage the transportation companies, transportation services are
presumptively non-taxable service.3
Miscellaneous
This letter represents the good faith opinion of Department personnel who are
knowledgeable on state taxes issues. However, the Department does not make a specific
determination here on any of the issues raised and the Department is not bound by this
general information letter.
The Department administers state and state-administered local sales and use taxes. This
letter does not address sales and use taxes administered by home-rule cities and home3

See Department Special Regulation 18 (Transportation Services). You can view this document on
the Department's web site at www.Colorado.gov/revenue/tax > Tax Library> Regulations> Final
Regulations > Sales Tax

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rule counties. You may wish to consult with local governments which administer their own
sales or use taxes about the applicability of those taxes. Visit our web site at
www.colorado.gov/revenue/tax for more information about state and local sales taxes.
Enclosed is a redacted version of this letter. Pursuant to statute and regulation, this
redacted letter will be made public within 60 days of the date of this letter. Please let me
know in writing within that 60 day period whether you have any suggestions or concerns
about this redacted letter.
Sincerely,

Office of Tax Policy
Colorado Department of Revenue

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