This problem happened to me in my development environment using Visual Studio Express and Sql Server Express.

The problem is my connection statement used Integrated Security=SSPI, which means I do not need to include a username and password, instead Windows will see if the user account under which the web application is running has the needed credentials to access Sql Server.

By default, the user account of the web application is the application pool name, which in this case is not authorized to access Sql Server.

To solve the problem change the web application to run under LocalSystem.

Go into IIS Manager. In your start menu search for IIS Manager.

Display the Application Pools.

Choose Advanced Settings.

Under Process Model, change Identity to LocalSystem.