Fees charged for premium content on mobile point-of-sale (POS) devices are subject to Connecticut sales and use tax. Customers pay the fees to get access to digital information and content. Under sales and use tax law, computer and data processing services are:
- taxable in Connecticut; and
- include retrieving or providing access to information.
In essence, a taxpayer that provides access to premium content on mobile POS devices is providing computer and data processing services. Thus, the taxpayer must collect and remit sales tax on the premuim content fees.
Here, the taxpayer pays a vendor a monthly fee for the use of mobile POS devices (i.e., tablets) and other property used with the devices, including servers and Wi-Fi controllers. Then, the taxpayer sells premium content to customers on the devices, charging fees. In addition to the monthly fee, the taxpayer pays the vendor a portion of its revenues from the premium content fees.
In Connecticut, the rental or leasing of tangible personal property is subject to sales and use tax. A “lease” is the transfer of the right to possession and use of goods for a period in return for consideration. The taxpayer pays the monthly fee for a “lease” of the devices. “Gross receipts” from renting or leasing property include the total payment, royalties, or periodic payments received under the lease. As such, the taxpayer also pays the additional fee for the “lease” of the devices. Consequently, the vendor’s gross receipts from leasing the mobile POS devices include both:
- the monthly fee; and
- the additional fee.
And both fees are lease payments subject to sales and use tax.
In addition, the vendor has physical presence in Connecticut due to its devices being located in Connecticut. Therefore, the vendor must:
- register with the Department of Revenue Services; and
- collect tax on the payments it receives from the taxpayer.
Ruling No. 2017-6, Connecticut Department of Revenue Services, September 21, 2017, ¶401-840