Software Consulting and Implementation Services Not Subject to Minnesota Sales Tax

Monday, September 30th, 2013


The Minnesota Tax Court recently ruled that a taxpayer's consulting and implementation services were not taxable either by themselves or as part of the sale of the taxpayer's software program.

A company sold software in Minnesota and provided consulting and implementation services along with the sale. The company charged separately for these services. The services included preparing the project, consulting with the customer, preparing a "blueprint" of the proposed software configuration, setting up the configuration, testing the configuration, and training the users. The taxpayer was not the only entity that provided such consulting and implementation services for its software.

Minnesota only taxes sales of services if they are (1) specifically identified as taxable or (2) necessary to complete a sale of tangible personal property. Services specifically identified as taxable include fabricating services when the customer provides the materials used in fabrication. Consulting and implementation services are not specifically identified as taxable.

The Minnesota Tax Court ruled that the taxpayer's consulting and implementation services were not subject to tax. Consulting and implementation services were not, by themselves, specifically identified as taxable. These services also did not constitute a taxable fabrication service because the customer did not provide the materials to create the configured software.

The consulting and implementation services were also not taxable as services necessary to complete a sale of tangible personal property. Nor were the charges for the services part of the sales price of the taxable sale of software. The Tax Court ruled that the services were not necessary to complete the sale of the software because other entities provided the same services. A customer could buy the software from the taxpayer and get the consulting and implementation services from someone else. They were not part of the sales price of the software because they were separately stated on the invoice. The taxpayer's charges for these services were therefore not 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 or call 866.578.8193.

New York Adopts New Economic Nexus Rule

Wednesday, January 23rd, 2019 -Effective January 2019, a retailer located outside of New York is required to collect use tax if, during the p...

New Commercial Farmer Certification Process in Louisiana

Monday, January 21st, 2019 -Effective January, 15, 2019, the Louisiana Department of Revenue has a new certification process for commercia...

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...