Policy letter; information services; Feb20,2001

Topic Code: I127Information Services (ST)           Document Reference: 01300031

February 20, 2001

Redacted Content

Recently, the department received your letter requesting an opinion regarding the taxability of two new products being launched by Redacted Content. Based on the information provided in your letter, Redacted Content is a corporation that provides a means to allow retailers to access consumer and business credit bureau information from the three national credit bureaus. The two new products and my opinion regarding the sale of these products are as follows:

          1.          CreditComander.com: This is a website created by Redacted Content, which allows retailers to submit requests for credit bureau information over the Internet. Redacted Content forwards the request to the appropriate credit bureau through a direct communication link. The credit bureau processes the request and passes the credit report through the Redacted Content website to the retailer. Redacted Content charges the retailer a transaction fee for this service.

Effective May 15, 2000 and made retroactive to March 15, 1995, the sale or rental of information services is exempt from Iowa sales and use tax.

“”Information services” is defined as “every business activity, process, or function by which a seller or its agent accumulates, prepares, organizes, or conveys data, facts, knowledge or procedures and like services to a buyer of such information through any tangible or intangible medium.”

Based on the foregoing, the fee charged for conveying the credit information would not be subject to Iowa sales or use tax.

          2.          Software Development Kit:

Redacted Content provides for a fee a software tool kit that is transferred to a purchaser by means of e-mail or Internet. The tool kit allows the retailer to integrate the process of pulling a credit report into their own internal systems, improving efficiency and minimizing keystrokes.

Effective May 15, 2000 and retroactive to March 15, 1995, Iowa Code section 422.34 was amended to provide a new definition for the terms “sale” and tangible personal property”. The new terms excluded from taxation transactions in which the substance of the transaction was delivered to the purchaser digitally, electronically, or utilizing a cable, or by radiowaves, microwaves, satellites or fiber optics.

The substance of the transaction in this case is the software, which is delivered via e-mail or the Internet. Based on this means of transfer, the fees charged to the purchaser for the software would be exempt from Iowa sales tax.

However, it is important to note that this new definition is presently set for repeal on December 31, 2002. Consequently, on that date, the transfer of this canned software would be subject to tax regardless of the means of transfer of the product to the purchaser.

I hope this information is of assistance to you. Please be advised that this letter is an informal opinion and does not bind the Department in any future action. If you have any additional questions regarding this matter, please do not hesitate to contact me.

Sincerely,

Jerri M.K. DeVries

Policy Section

Office: (515) 281-3194

Fax: (515) 242-6487