DC OTR Targeting Technology Companies
Technology Companies with Washington, D.C. Customers May Find a New Target on Their Backs.
Under District of Columbia statute, data processing services are subject to sales tax. Although this is not a new law, it is a recent hot button for audit activity by the D.C. Office of Tax and Revenue (OTR). The OTR is targeting the following services as taxable data processing:
- IT services (phone and computer hardware and network services)
- Cloud computing
- Computer programming
- Software updates
- Big Data services
- Database administration (record maintenance)
- Database support (database services, list management, gathering, data organization and consolidation)
- Data manipulation (culling and organizing customer data)
- Website design and development
- Mobile application development
- Litigation document support
The D.C. audit staff is casting a wide net to catch all types of technology companies who file D.C. franchise tax returns but have failed to file D.C. sales tax returns. Also being targeted are out-of-state technology companies whose invoices were included in D.C. sales tax audits of other taxpayers.
Assessments may go back to the year the business first began performing services in D.C. and can result in large amounts of tax, penalties and interest for back years. WTAS has successfully defended clients under audit in this area by interpreting the D.C. statute as it may relate to a technology company’s services. WTAS is experienced in audit defense, ruling request preparation, and the voluntary disclosure process for those taxpayers engaging in potential taxable services.