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.

Service Repairs to Petroleum Storage Tanks Exempt in...

Friday, January 18th, 2019 -Louisiana's Board of Tax Appeals recently ruled that repairs on petroleum storage tanks were not taxable. ...

Nevada Exempts Feminine Hygiene Products in 2019

Wednesday, January 16th, 2019 -Last year, Nevada voters approved via ballot measure changes to the Sales and Use Tax Act of 1955. Voters amen...

Cleaning of Beer-Tap Lines Not Taxable in Ohio

Monday, January 14th, 2019 -The Supreme Court of Ohio recently ruled that cleaning beer-tap lines is not taxable. The taxpayer was...

Louisiana Court of Appeals Finds Marketplace Facilitators...

Friday, January 11th, 2019 -The Louisiana Court of Appeals has recently addressed the sales tax liability of marketplace facilitators. A c...

Iowa Supreme Court Determines Taxable Carpentry Services...

Wednesday, January 9th, 2019 -The Iowa Supreme Court has recently addressed the taxability of various installation services. The taxpayer wa...

Tax Applies to Metallurgical Coke in Illinois

Monday, January 7th, 2019 -Illinois recently ruled that use tax was due on purchases of metallurgical coke. The taxpayer was a business t...