Virtual Event Center Subject to Sales Tax in Massachusetts as the Sale of Software

Wednesday, June 12th, 2013

 
 
Share
Link
Massachusetts
General

The Massachusetts Department of Revenue recently ruled that a company's sale of a virtual events planning platform was a taxable sale of software. Mass. Ltr. Rul. No. 13-5 (Dept. of Revenue Jun. 4, 2013).

The virtual events planning platform allows purchasers to remotely access software to create their own cloud-based event, like a virtual job fair, where users can come together in a virtual events center. Purchasers never actually receive any software, they only access and use the software remotely. The company selling the virtual events planning platform requested the ruling to find out whether its sales are subject to sales tax.

The Department determined that the object of the sale, in essence, is providing purchasers access to prewritten software on the seller's servers. Citing a sales tax regulation, the Department explained that sales of prewritten software are taxable regardless of the method of delivery and that this rule extends to "transfers of rights to use software installed on a remote server." 830 Code Mass. Regs. 64H.1.3(3)(a). Accordingly, the Department ruled the company's sales of subscriptions to the virtual events planning platform are taxable sales of prewritten software.

Furthermore, the Department discussed "Software-as-a-Service" (SaaS) in the ruling, stating that SaaS is generally taxable. The Department explained that marketing descriptions do not determine the taxability of a product. Because "transfers of rights to use software installed on a remote server" are taxable, SaaS is taxable regardless of whether the seller markets it as a service.

Finally, the Department noted two exceptions to the general rule that SaaS is taxable. First, if the true object of the transaction is a non-taxable service, and the SaaS is only incidental, the entire transaction will not be taxable. Second, if non-taxable services are sold unbundled from the SaaS (e.g., separately stated and optional), then the non-taxable portion of the charge will not be subject to tax.


About TTR

Transaction (buying or selling things), Tax (the tax on this activity), Resources (our people, our website, our support services) - TTR, Inc.

TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

TTR likes to keep things simple and fun, which is why it has great people who provide help to clients on any support questions they have about transaction tax issues.

Please visit TTR on the web at www.ttrus.com or call 866.578.8193.

Vehicles Used to Transport Materials between Facilities...

Wednesday, August 15th, 2018 -The Arkansas Department of Finance and Administration recently ruled that a vehicle used to transport in-proce...

Economic Nexus in Washington

Monday, August 13th, 2018 -Effective October 1, 2018, certain out-of-state businesses will be required to collect and pay Washington sale...

Economic Nexus in Michigan

Thursday, August 9th, 2018 -Effective October 1, 2018, certain out-of-state sellers will be required to collect and pay Michigan sales or ...

Georgia Suspends Tax on Jet Fuel

Wednesday, August 8th, 2018 -Effective August 1, 2018, Georgia no longer collects state level sales and use tax on jet fuel. Georgia tax...

Employment Services Contracts for Permanent Employees Not...

Monday, August 6th, 2018 -The Ohio Board of Tax Appeals recently addressed whether contracts entered into by an employment services agen...

Alarm Systems and Monitoring Not Taxable in Missouri

Wednesday, August 1st, 2018 -The Missouri Department of Revenue recently released a ruling determining that (1) security, fire, tornado, an...