Is there tax on web hosting?

No, web hosting is a non-taxable service. For many of the states that exempt web hosting, it's important to separate other taxable elements from web hosting charges. The bundling of taxable and exempt services and charges generally makes the entire charge taxable. California exempts web hosting to the extent that no TPP is transferred to the customer.

Many states, such as Georgia and Kansas, rule that taxable software charges must be reported separately. Other states, such as Kansas and Massachusetts, will tax web hosting, even if stated separately, if it is required or contractually required as part of a software sale. The Iowa Department of Revenue issued guidance stating that web hosting is not taxable as a service in the state. While web hosting is not defined by existing rules, “it is generally understood as an online service that allows users to publish their website files on the Internet to make the website available for public access.

Web hosting is the publication of data and not just the storage of data. Therefore, since Iowa only taxes software as a service, web hosting is not taxable in the state. Tax on specific digital products, software and related services, effective immediately). Both backend businesses can benefit from the state's unique sales tax rules for hosting facilities.

To receive resource and guidance notifications issued by the Department, subscribe to updates by selecting tax topics of interest. But, once again, the rules related to co-location facilities show that a backend installation used to host web-based software products may be entitled to preferential tax treatment over sales. Noonan's Notes Blog regularly provides analysis and commentary on developments in the New York world and multi-state tax law. Second, thanks in part to a recent advisory opinion from New York State, co-location facility operators now know that many of the separate services they provide, including charges for physical spaces used to host their customers' servers; various unmetered utility costs; cabling and bandwidth charges; and certain types of technical support are generally tax-exempt.

First, Internet data center operators generally do not pay sales tax for the purchase or use of machinery, equipment, and other tangible personal property (including software) and services used in the data center for website hosting. Taxes apply to taxable products and services under the tax laws of the customer's billing address. But similar to the general public's limited understanding of the complicated back-end operation of the Internet, many tax professionals (and taxpayers) may not appreciate the unique and potentially favorable sales tax rules that apply to the service providers they support specifically to providers of web-based software, Internet data centers, and co-location facilities that house the servers used to host many software products. For New York State tax purposes, an operator of an “Internet data center” is any person who operates a facility specifically designed and built to securely maintain servers and similar equipment that are used to continuously host Internet websites.

Marlin Faltin
Marlin Faltin

Extreme student. Award-winning bacon trailblazer. Lifelong beer specialist. Incurable internet scholar. Lifelong travel practitioner. Total coffee nerd.