Sales of Prewritten Software in New York are Taxable based on Location of Use.

The New York Department of Taxation and Finance has determined that sales of prewritten computer software are subject to New York sales and use tax even thought the delivery was to the customer in Tennessee. Prewritten software qualifies as tangible personal property regardless of how it was conveyed to the purchaser. The software can be used just as effectively whether delivered on a tangible medium or by download. Although a sale is generally deemed taxable at the point of delivery, with respect to a license to use, a transfer of possession has occurred if there is a transfer of actual or constructive possession, or if there has been a transfer of the “right to use, control or direct the use of tangible personal property”. The use of the software qualifies as transfer of possession because the purchaser has constructive possession of the software and has the “right to use, or control or direct the use of” the software. If software purchased by a customer is used by its employees both in and out of New York, tax should be collected on the portion of the receipt that is attributed to the New York employees. ( 406-884. TSB-A-10(28)S, New York Commissioner of Taxation and Finance, July 2, 2010).

Posted on January 8, 2011