North Carolina Taxes Subscriptions to Web-Based Report Generating Services

May 28th, 2021

The North Carolina Department of Revenue (DOR) recently ruled that the sale of a subscription allowing a client access to reports hosted in the cloud was a taxable service. The company offered information on various industries that allowed its clients' sales teams to obtain new business accounts and retain existing clients. Clients purchased subscriptions in which they could specify the types of information and data they required to fit their business needs. Clients received reports that they accessed electronically through the company's web-based portal. The reports were not customized to the clients, and the clients could add their own content. The clients did not receive any tangible property and they did not download anything to their computers to facilitate information viewing.

North Carolina taxes "certain digital property," which includes "additional digital goods." "Additional digital goods" includes magazines, newspapers, newsletters, reports, or other publications. The DOR determined that the reports generated by the company qualified as "certain digital property." As a result, the subscription fees charged by the company were subject to sales and use tax.