New York Court Rules Vendor Management Software Licenses Are Taxable as Prewritten Software Sales

• A New York appeals court ruled that fees for licenses to access vendor management software (VMS) are taxable as sales of prewritten software.
• The taxpayer argued that it provides nontaxable services, not prewritten software, but the court found the software license to be a core element of its business.
• The court determined that any customization of the VMS was only aesthetic and did not change the underlying source code, so it remained prewritten software.
• The court applied the “true object” test and concluded that the software license was not incidental but central to the taxpayer’s transactions.
• All of the taxpayer’s arguments were rejected, and the tax assessment was upheld.

Source: kpmg.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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