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SALT Technology Checklist

3rd Quarter 2023  – A quarterly publication that summarizes technology-related state tax guidance and legislative developments

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State and Local Tax

States are increasingly attempting to address the application of tax to emerging technology and business models through new law, court cases, and administrative rulings. Tracking developments is critical not only for technology providers, but also for purchasers of technology. 

To make recent developments more accessible, the KPMG Washington National Tax –State and Local Tax practice has created a quarterly Technology Checklist that summarizes recent state guidance for topics such as access to telecommunications services, web-based services, software, and streaming services.

Highlights of the 3rd Quarter 2023 checklist include: 

  • California: California Governor Gavin Newsom signed a budget bill that includes tax breaks for semiconductor companies. Senate Bill 131 modifies the new employment tax credit to attract semiconductor factories, responding to federal incentives aimed at strengthening the microprocessor supply chain.
  • Tennessee: The Tennessee Department of Revenue ruled that a technology company providing staff augmentation and payment processing services through a digital platform was not subject to sales and use tax. The Department explained that staff augmentation and payment processing services are not taxable services, and the use of the app to access the platform was merely incidental to the non-taxable services.
  • Texas: The Texas Comptroller released updated guidance on the taxability of electronic games and associated content. Electronic games, subscriptions, and membership fees for electronic games and game communities are taxable as amusement services. Purchases of associated content for electronic games, such as virtual goods, additional game content, gameplay enhancements, and aesthetic enhancements, are also taxable as amusement services.
  • Virginia: The Virginia Tax Commissioner ruled that a taxpayer was eligible for a data center exemption for sales and use tax purposes. Initially, the taxpayer’s refund request was partially denied by the Department of Revenue because the taxpayer’s equipment was delivered to a storage facility instead of directly to the data center. Based on a previous ruling, the Commissioner found that the data center exemption applied to the taxpayer’s equipment regardless of the delivery location.
  • Vermont: The Vermont Department of Taxes updated its sales tax guidance for prewritten software accessed remotely. Specifically, charges for software as a service (SaaS), infrastructure as a service (IaaS), and platform as a service (PaaS) are not taxable for Vermont sales tax purposes. 

Many more developments are covered in the Techlist, download it below. 

Dive into our thinking:

State and Local Tax Technology Checklist

Guidance from the third quarter of 2023

Download PDF

Meet our team

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Reid Okimoto
Principal, State & Local Tax, KPMG US
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Audra Mitchell
Managing Director, WNT - SALT U.S. Indirect Tax, KPMG US

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