Sales/Use/Indirect:
Rhode Island: DNA Testing and Subsequent Access to Online Reports Constitutes Taxable Vendor-Hosted Software
Declaratory Order 2025-01, R.I. Div. of Tax. (1/29/25). In a declaratory order involving a company providing DNA testing and analysis and online ancestral/health history reports to individual customers (including to customers in Rhode Island), the Rhode Island Division of Taxation (Division) held that based on the provided facts, the company’s product is considered taxable in Rhode Island as vendor-hosted prewritten computer software. Under the facts, the customers provide a saliva sample via a kit that the company mails to its customers, and based on this information, the company sells access to software that allows customers to access ancestral and health history reports online. In this respect, the Division explains that the software at issue is vendor-hosted as it “is accessed through the internet and/or a vendor-hosted server regardless of whether the access is permanent or temporary and regardless of whether any downloading occurs.” In doing so, the Division notes that “the key feature of the product” is the company’s website that allows its clients to view data and reports per their subscription. Because the product is considered taxable vendor-hosted prewritten computer software, the Division also explains that the product is taxable regardless of whether it is bundled with other tangible personal property. Moreover, the Division concluded that the DNA testing kits are not subject to Rhode Island use tax, because they are included with the sales price of the taxable software. Please contact us with any questions.
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