Web Service does not return data from MS SQL in IIS

Hello everyone,

I am new to ASP.NET development.  I created a web service and deployed into IIS 7.0 environment.  My web service works fine within VS 2012,  I am using below connection string to query my SQL database without issue from VS 2012.  The connection string is: 

 <connectionStrings>
    <add name="MYDB" connectionString="data source=MYCOMPUTER\MYDATADB; Integrated Security=SSPI; Database=my_Inventory"
         providerName="System.Data.SqlClient"/>
  </connectionStrings> 

However, my web service does not return data from SQL when it is running in IIS.  Any idea?  What permission do I need to setup?

<?xml version="1.0" encoding="utf-8" ?>

<Inventory xmlns:xsd="http://www.w3.org/2001/XMLSchema" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xsi:nil="true" xmlns="http://localhost/MyWebservices/" />

BTW - I found below error from SQL error log. 

Login failed for user 'IIS APPPOOL\DefaultAppPool'. Reason: Could not find a login matching the name provided. [CLIENT: <local machine>]

Please advise,

Thanks,

Brian.