- The Michigan Department of Treasury issued a technical advice letter to a foreign-based taxpayer regarding software as a service (SaaS).
- The taxpayer sells subscriptions to customers in the United States, providing access to information hosted in the cloud.
- The taxpayer inquired whether the transactions should be treated as the sale of prewritten computer software or nontaxable services.
- The Department applied a previous court decision and ruled that transactions without a downloaded application were not taxable, while transactions with a downloaded application constituted the sale of prewritten computer software but were not taxable since they were incidental to the provision of services.
- The Department’s analysis was limited due to a lack of information on how the incidental-to-service test was applied to the downloaded application transactions.
Source PwC
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