A decision issued on September 18, 2025, by New York’s Tax Appeals Tribunal has major implications for companies that sell or use cloud-based software. The Tribunal rules that CBRE’s facility management platform, fmPilot, is subject to New York sales tax, even though it is part of a broader facilities management services package. The case involved FacilitySource, LLCV and FacilitySource Northeast Services, LLC, both owned by CBRE Group, Inc., one of the largest commercial real estate firms in the world. FacilitySource helps retail chains and property owners manage maintenance tracking. Customers log-in to fmPilot, a web-based program that tracks work orders, dispatches repair crews, and generates reports. Additionally, FacilitySource runs call centers where employees coordinate maintenance projects with contractors across the country.
The Department of Taxation and Finance (Department) determined that the companies’ service fees charged to their customers for managing repairs and maintenance were considered payments for access to prewritten computer software. According to the state’s auditors, Facility Source’s fees were not for customer support, but they included the right to use fmPilot, a computer program developed before any specific customer contract. Under New York law, prewritten software is taxable, even if it is delivered over the internet. Because fmPilot is considered an essential part of the company’s service and customers interacted with it directly, the entire subscription charge was deemed taxable.
CBRE’s legal team pushed back, describing fmPilot as a communication tool and saying that their clients were paying for people and not the program. They also pointed to federal protections for online services, claiming that the Internet Tax Freedom Act (ITFA) should prevent states from taxing web-based access. The Tribunal disagreed and sided with the state, ruling that ITFA does not protect companies when what they are really selling is the use of prewritten software, even if done so online. The Tribunal concluded that FacilitySources Integrated Facilities Management Service relied on fmPilot as its technological backbone even though it included personal interaction.
If your business offers a service that includes customer access to an online platform or portal, pay close attention to the true service or product that you are offering and do your research on the taxability of such. If you are bundling services with technology, consider separately stating charges for software access to avoid unexpected sales tax liabilities.
(In the Matter of Petition of FacilityCource, LLC and Facility Source Northeast Services, LLC, DTA Nos. 829500 & 829501, New York State Tax Appeals Tribunal, Decision issued on September 18, 2025)