Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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A

120.0000 AUTOMATIC DATA PROCESSING SERVICES AND EQUIPMENT—Regulation 1502

Annotation 120.2779

(b) PROCESSING CUSTOMER-FURNISHED INFORMATION

120.2779 Processing Customer-Furnished Information. A taxpayer receives documents from a client which are inputted into the computer using a scanner. The taxpayer then extracts, manipulates, and sorts the data from the documents according to the contracted instructions of its client. The data is then written onto an output medium, CDs (compact disks). The taxpayer makes a separate charge to its customer for the cost of the compact disks used to transfer the original information developed by the taxpayer. The taxpayer also makes a separate charge to its customer for pick-up and delivery of the customer-furnished documents and the compact disk containing the original information developed by the taxpayer.

The extracting, manipulating, and sorting data furnished by the taxpayer's customers, and the updating of a continuous file of information maintained by the customer, constitute a nontaxable processing service under Regulation 1502(d)(5). Accordingly, the charges for this service are not subject to sales tax. The separately-stated charges for the cost of the compact disks used to transfer the original information developed by the taxpayer are subject to the sales tax. Regulation 1502(h) specifically provides that if the data processing firm's billing is for nontaxable processing of customer-furnished information, tax will not apply to pick-up and delivery charges. Thus, the pick-up and delivery charges for the customer-furnished documents and the compact disks containing the original information developed by the taxpayer are not subject to tax. 10/31/96.