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Colorado Department of Revenue Issues Guidance on Web Seminars and Cloud Collaboration Services

Tax Development Oct 05, 2016

The Colorado Department of Revenue (“Department”) recently issued two rulings addressing the application of Colorado sales and use tax to live web seminars and web collaboration services. 

Live Web Seminars
A taxpayer requested guidance on the application of Colorado sales tax to live online seminar fees, prerecorded online seminars, and fees to access self-study material online. The Department reviewed the taxpayer’s transactions and found that charges to view live seminars online are not subject to Colorado sales tax because such charges are for an exempt service. However, charges to view prerecorded seminars online were subject to tax because unlike the live seminar, there was no student/instructor interaction. Therefore, the charge was for taxable training material rather than exempt instruction services. Similarly, the charge to access self-study material was also subject to tax due to the absence of instructor interaction. 

The full discussion can be found in Colorado Department of Revenue GIL-16-009.

Web Collaboration
The taxpayer in question offers web collaboration services. The cloud-based collaboration service consists of a web conferencing application that allows users to share their desktops through a web browser. The service does not include any tangible personal property. Customers access the service using their own devices. 

Colorado sales tax applies to intrastate telephone services. The Department found that the web collaboration services in question were teleconferencing services and further determined that the provision of teleconferencing is actually a telephone service. The taxpayer argued that its service was not a telephone service because they did not provide all the necessary connections to reach the teleconferencing service. The Department disagreed, finding that a service provider need not provide all the components of the teleconference service for it to be considered a taxable telephone service. The taxpayer further argued that the service was not an intrastate telephone service because the servers hosting the collaboration application were located outside the state.  The Department, viewing each “call” accessing the web collaboration cloud application to be a call to an out-of-state location, agreed and concluded the taxpayer’s web collaboration services were exempt interstate telephone services.

The full discussion can be found in Colorado Department of Revenue PLR-16-014.