The information in these guides is general in nature and does not replace or substitute Washington rules or laws, nor is it intended to be a statement of Department of Revenue policy.
Internet-based businesses
Advertising Income
Income from advertising is subject to the business and occupation (B&O) tax under the service and other activities classification.
Subscription Income
The taxability of subscription income depends on what the subscription provides to the customer. Some examples are:
Retail Sales: If the subscription entitles the subscriber to download a product or publication, including standard information sold to any consumer, the income is subject to retailing B&O tax and retail sales tax if the subscriber/purchaser is in Washington. Examples of retail downloads include music files, video files, and information files that are sold to multiple users.
Access Charges (Application Service Providers) If the subscription entitles the subscriber to read, use, or access information or software applications online but does not allow for the subscriber to download software applications, products, or publications, the income is subject to B&O tax under the service and other activities classification (sales tax does not apply) based on the service being provided in Washington (not dependent on where the customer is located).
Data processing services:
Charges for data processing services performed in this state are subject to service and other activities B&O tax (sales tax does not apply). "Data processing services" include, word processing, data entry, data retrieval, data search, information compilation, payroll processing, business accounts processing, data production, and other computerized data and information storage or manipulation. "Data processing services" also includes the use of a system for data processing.
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