On January 12, 2023, the Louisiana Board of Tax Appeals (the “Board”) granted a motion for partial summary judgment in Apple, Inc. v. Samuel, Dkt. No. L01283 (January 12, 2023) and held that the Internet Tax Freedom Act (the “ITFA”) prohibited Orleans Parish from imposing sales tax on subscription fees paid for the use of personal storage on Apple’s iCloud. In so holding, the Board also noted that personal electronic storage services are not specifically enumerated as taxable services in La. R.S. 47:301(14) and thus would not be considered taxable services for Louisiana sales and use tax purposes.
Scope of “Internet Access” under the ITFA
The ITFA imposes a moratorium on states (and their political subdivisions) levying taxes on “Internet Access” or imposing discriminatory taxes or multiple taxes on electronic commerce. In 2007, the definition of “Internet Access” was expanded to include several items including “personal electronic storage capacity” when “provided independently or not packaged with Internet access.”
Apple’s iCloud storage offering allows a user to upload personal digital content (including data, photos, music, videos etc.) to remote servers, and retrieve that data, via an internet connection, by using any of their Apple devices or other devices connected to the internet. iCloud comes preloaded on Apple devices with no charge for its use. However, a user seeking to store more than 5 gigabytes of data must pay a monthly subscription fee, with storage plans ranging from $0.99 to $9.99 a month. A user does not receive any additional software upon subscribing to one of these plans, only increased storage on iCloud.
The Orleans Parish Tax Collector (the “Collector”) conducted an audit of Apple and issued a notice of assessment that sought to impose sales tax on the subscription fees Apple received for iCloud storage subscriptions. Apple appealed the assessment to the Board.
In its Motion for Partial Summary Judgment (“MSJ”), Apple asserted that the subscription fees paid for additional iCloud storage qualified as “Internet Access” under ITFA, and that Orleans Parish, as a subdivision of the state of Louisiana, was preempted from imposing a sales tax on those fees under the Supremacy Clause of the United States Constitution. The Collector notified the Board that it would not oppose, nor consent to, Apple’s motion, and did not appear at the hearing.
The Board analyzed the definition of “Internet Access” using dictionary definitions and concluded that the iCloud offering fit within the ordinary meaning of the statutory language under ITFA and that Apple’s prayer for partial summary judgment was therefore supported by the “uncontested facts and the plain language of the statute.”
Taxability under the Louisiana statute
In its holding, the Board also noted an additional ground for granting Apple’s motion, specifically, that iCloud storage is a service that is not among the enumerated taxable services under Louisiana law. As a result, iCloud storage should be treated as a non-taxable service. The Collector also did not oppose the affidavit characterizing iCloud storage as a service.
Similar proceedings related to the taxation of digital products and services are ongoing in other states. For example, Apple has also asserted that the ITFA operates to prohibit Texas from subjecting its iCloud Storage and iTunes Match services to Texas sales tax as taxable as data processing services. While the Collector did not oppose Apple’s motion in Louisiana, the Texas Comptroller of Public Accounts ( the “Comptroller”) is arguing that the Texas sales tax does not violate the ITFA because the Texas tax did not single out transactions using the internet that would be barred by the ITFA, but instead singled out transactions using a computer. In the alternative, the Comptroller has asserted that the ITFA is itself unconstitutional under the anti-commandeering doctrine that does not permit Congress to issue orders directly to the states.
In Comcast, the ITFA was also one of the grounds on which Maryland’s digital services tax (“DST”) on advertising was held by a district court to be unconstitutional. Specifically, in Comcast the court in that case held that the DST violated ITFA because traditional advertising was not equivalently taxed by the state. The Maryland Supreme Court has since granted direct appeal of the trial court’s ruling but denied the state’s motion to stay enforcement pending the appeal.
What makes the Louisiana case unique is that ITFA arguments usually require a demonstration that the state is discriminating between activities carried out through the internet and those that are carried out offline, as in the Texas and Maryland proceedings above. However, in this case the Board highlights certain activities that qualify as “Internet Access” that states cannot tax at all, whether discriminatorily or otherwise.
The additional ground noted by the Board in this case also affirms that services are not generally taxable unless specifically covered under the Louisiana sales tax statute. At present, the statute only taxes eight categories of service. The state and its political subdivisions are prohibited from subjecting any service that is not enumerated in the statute to state or local sales or use tax.
At present it is not clear whether Orleans Parish intends to appeal the Board’s decision. However, any business that provides personal data storage services or other services listed in the ITFA should review its Louisiana state or local sales and use taxes and consider whether it is properly classifying its digital services as taxable or non-taxable. Similarly, any customer that has paid a significant amount of Louisiana state or local sales or use taxes on non-taxable digital services should also consider whether it is appropriate to file a refund claim.
For additional information, please contact: Jaye Calhoun at (504) 293-5936 or Willie Kolarik at (225) 382-3441.
 ITFA Sec. 1101(a)(1) & (2) and 1105(5)(A) & (E).
 The MSJ was limited to local sales tax on the subscription fees for iCloud storage, while the remainder of Apple’s petition (Docket No. L01283) included subscription fees paid for Apple Music.
 Article VI, Paragraph 2 of the Constitution of the United States.
 The Board also referenced J2 Cloud Servs., Inc. (f/k/a J2 Glob., Inc. & J2 Glob. Commc’ns, Inc.) v. Comm’r of Revenue, Docket No. C325426, 2019 WL 1102964, at7 (Mass. App. Tax. Bd. Feb. 27, 2019), in which the Massachusetts Appellate Tax Board rejected an ITFA challenge because any storage services in that case were not provided for independently but were packaged along with an eFax service.
 La. R.S. 47:301(14).
 Tex. Tax Code Sec. 151.0035.
 Apple Inc. v. Glenn Hegar, Comptroller of Public Accounts et al., Case No. D-1-GN-20-004108, District Court of Travis County, Texas, 345th Judicial District.
 Comcast v. Comptroller, Case No. C-02-cv-21-000509 (Cir. Ct. for Anne Arundel County, Oct. 20, 2023).
 Comcast v. Comptroller, Case No. SCM-REG-0032-2022 (S. Ct. of Md., Jan. 20, 2023).
 La. R.S. 47:301(14).