Pity your poor vendor of web conferencing (webinar, webcast, whatever) and audio conferencing services. Do they need to collect state sales taxes from customers and pay them back to each state's department of revenue?
Until this morning, I would have said "Of course not! Don't be ridiculous. Web conferencing customers aren't buying taxable goods."
Then I read a briefing from Sutherland Asbill & Brennan LLP on the Lexology.com website. It turns out that cloud-based collaboration may or may not be taxable depending on each state's local rulings. Tennessee and South Carolina just ruled that cloud collaboration is a taxable communications service. Tennessee further classified the telecommunications components of the service as intrastate telecommunications, which are subject to a higher local tax rate.
Sutherland has been following the rulings on telecommunication and web collaboration from various states. So far Georgia and Illinois say no, while Colorado, Missouri, New Mexico, Ohio, and Utah have said that at least some components of the service are taxable. I find it extremely difficult to understand which specific service components are taxable, and under what tax rate structure. I'm glad I'm not in that business!
