Shaking things up in state and local tax
Shaking things up in state and local tax
By Mary Alexander and Prentiss Willson
The Arizona Department of Revenue determined in a private letter ruling that gross receipts from “renting” prewritten software available online are subject to Arizona’s transaction privilege tax (TPT). The definition of tangible personal property for purposes of the TPT includes the electronic delivery of software. Thus, according to the…
By David Pope and Prentiss Willson
The New Jersey Division of Taxation concluded in a technical bulletin that sales of cloud computing services are not subject to sales and use tax in New Jersey. Although this is not a change to the Division’s position, the bulletin specifically identifies software as a service (SaaS), platform as…
By Kathryn Pittman and Timothy Gustafson
The Massachusetts Commissioner of Revenue concluded in a letter ruling that a taxpayer’s sales of subscriptions to use its virtual event platform and planning software were subject to sales tax where the use of the software was the object of the transactions. For a flat fee based on length…
By David Pope and Timothy Gustafson
Pursuant to a letter ruling request, the Massachusetts Department of Revenue determined that a taxpayer’s bundled sale of software and services related to Internet-based marketing and customer communications solutions was subject to Massachusetts sales tax. The taxpayer provided different types of software to its subscribers, which organized customer reviews, questions…
We are pleased to provide the following updates on state tax issues impacting the digital economy. The Sutherland SALT Team will continue to monitor these and other Digital Economy developments. Please visit the Sutherland SALT Digital Economy Forum to learn more, and please contact one of us if you have questions regarding the Forum.
Texas…
We recently launched the Sutherland SALT Digital Economy Forum, which provides comprehensive state tax resources regarding the taxation of the digital economy. Following is a summary of recent digital economy administrative guidance, noteworthy cases and legislation. If you would like to learn more about the Sutherland SALT Digital Economy Forum or any of the issues covered here, please contact us.
Administrative Guidance
Continue Reading Digital Economy Update: Administrative Guidance, Noteworthy Cases and Legislation
On December 18, 2012, the California Court of Appeal ruled that receipts from the right to replicate software are sourced as sales “other than tangible personal property.” In reversing the trial court, the Court of Appeal upheld the taxpayer’s use of costs of performance sourcing. Microsoft Corporation v. Franchise Tax Board, Case No. A131964…
The New York State Department of Taxation and Finance (Department) issued a pair of advisory opinions regarding the sales taxability of consulting services and software. New York’s Tax Law generally imposes sales and use tax on receipts for furnishing information services. N.Y. Tax Law § 1105(c)(1). However, in both advisory opinions, the primary transactions were not subject to New York sales tax because they were within the exception for personalized information services and information services provided orally. See 20 NYCRR § 527.3(b)(2) & (3).Continue Reading Software in Conjunction with Information Services: What’s Your Function?
The Colorado Court of Appeals issued an opinion interpreting the City of Boulder’s software definition very broadly to impose use tax on downloaded software and, even more problematically, access to an online data service. Ball Aerospace & Techs. Corp. v. City of Boulder, Docket No. 2012 COA 153 (Colo. Ct. App. Sept. 13, 2012).…
Iowa and Kansas recently issued rulings regarding the taxability of cloud-based software applications and online training services. While the conclusions reached by both states—that the services are not taxable—are generally the same, the reasoning relied upon by each department of revenue illustrates the ongoing uncertainty of applying state sales and use tax laws to cloud computing services.
The Iowa Department of Revenue (IDOR) looked to the state’s statutory authority and acknowledged that the taxability of “cloud computing has not been expressly addressed by the Iowa Code.” Nonetheless, the IDOR determined that the sale of hosted software is not taxable because the Iowa Code provides that a “taxable ‘sale’ of tangible personal property does not occur if the substance of the transaction is delivered to the purchaser digitally, electronically, or by utilizing cable, radio waves, microwaves, satellites, or fiber optics.” I.C. § 423.3(67). Likewise, the IDOR considered web-based training to be nontaxable because “software training” is not an enumerated service under the Iowa Code.Continue Reading Iowa and Kansas: Remote Access to Software is Not Taxable . . . Or Is It?
