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  1. #1

    Do you pay Sales Tax on your Colo?

    Hello Folks -- a few months ago AboveNet hit us with a 3.095% NYS Franchise 186-A/E tax which after some research turned out to be legitimate and we could stomach it. On our most recent invoice they've tacked on a 8.375% NYC sales tax so we're looking at a nearly 11.5% tax on our entire invoice per month.

    My question is, do any of you pay sales tax for your colo? I'm especially interested in hearing from anyone who has a colo in New York City. Our business location is in NJ so I've always thought we're except from sales tax.

    As with all taxes, if the majority are paying them we'll have to stomach it and pay them also but to my knowledge no one I know is paying any sales tax for their colo's. Being out of state I don't think we should be charged any sales tax at all so I'm looking to gather some opinions before contacting AboveNet. I'll also contact my accountant first thing next week.

    Thanks for your input!

  2. #2
    Join Date
    May 2005
    Im living in Ireland, I have colo in Texas and I am paying 6.6% sales tax. When I first ordered I had no tax untill a few months later it was added. I haven't contacted the provider about it as Im not too bothered. I don't have much colo'd there.
    If I was paying 11.5% and had a large bill each month I would definately contact the provider and ask for more detailed info.

  3. #3
    Join Date
    Mar 2005
    New York City
    Technically, unless they have an office in your state of which New Jersey and New York are two separate states, it is illegal to my knowledge to tax others in other states because you cant post it on your return. That just brings extra cash in for the company.

    Matthew Rosenblatt, and I do lots of things.
    Currently a Master Electrician on Broadway.
    My company, BurstAV, specializes in A/V Systems Design and integration.
    I also own ConcertCables. We build power/data cables for the entertainment industry.

  4. #4
    This is not always true, and is why you should always check with the appropriate city/state authority. The charging of sales tax depends on how the service is classified and where the service is provided, and can vary greatly from state to state.

  5. #5
    Join Date
    Nov 2005
    Michigan, USA
    Colocation is a service. Where I live atleast there are not taxes on services, just goods. You might want to check to see if NY requires tax on services.

    I never paid sales tax for my NYC colo but that was 3 years ago and I live in Michigan so I'm not sure how it works.

  6. #6
    Join Date
    Feb 2002
    New York, NY
    We have co-location in multiple NYC locations, and have never been charged sales tax. Co-location is a service, not a product, so it sound suspicious that you are being charged a sales tax. I would definitely speak to your provider about it.
    Scott Burns, President
    BQ Internet Corporation
    Remote Rsync and FTP backup solutions
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  7. #7
    Join Date
    Dec 2001
    Toronto, Ontario, Canada
    We charge tax on our colo. We didn't for the first few years, until we got audited, and had to hand over the GST (Goods and Services Tax) for all non-taxed colo's for the last few years (ouch!).

    The explanation I was offered was quite simple. If you colocate gear in Ontario, its considered a business presence/physical presence, and thus taxable.

  8. #8
    Join Date
    Jan 2004
    Boise, ID
    It all depends on how the state, city, county, or other government agency decides to view it.

    They can view it as you are doing business in that city due to the fact you have a "Presence" there due to having servers you own located that.

    As for sales tax on colocation, that doesn't seem right. A "USE" tax I could see, but not sales.

  9. #9
    Join Date
    Apr 2004
    Nearly everywhere has what is called an Ad Valorem tax or "at value". If you own a piece of hardware that is an asset within the Taxing juristiction, you should pay a tax based on the colocated "at value" eatimation of the asset.

    This one flies under the radar on most people, but colocation providers are required to give your name and address to the tax man.
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