- The New York Tax Appeals Tribunal upheld that the sale of software-as-a-service (SaaS) along with managed services is taxable as the sale of prewritten software.
- The taxpayer, a Florida-based company, offered a vendor management system (VMS) software platform and managed supplier program (MSP) services. The Division of Taxation assessed sales tax, considering the VMS as a taxable license of prewritten software.
- The Tribunal determined that the software was not customized, the primary function test did not apply, and the nontaxable services were not separately stated. As a result, the Division’s assessment of sales tax on the VMS fees was deemed appropriate. Companies providing similar services in New York should separate charges for services and software licensing to avoid tax exposure.
Source PwC
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