In a recent Advisory Opinion, a taxpayer’s computer-based online training software modules were found to be pre-written software, and therefore taxable, because the modules were designed for sale to multiple customers. The taxpayer’s customization services, which allow the customer to combine topics from multiple courses, were also considered pre-written software, because the combining of multiple prewritten programs does not cause the combination to be anything other than pre-written software. However, reasonable, separately-stated charges for custom modifications to the modules would not be taxable when performed and sold to the customer who requested the modifications.
In some cases, the taxpayer provides video-based training including a virtual classroom where instructors interact with the participants through chat, polling, audio, desktop sharing, and quizzes. Since this service is a training class led by an instructor, it is considered an education service, which is not one of the enumerated services subject to tax in New York.
The taxpayer also offers a web-based Referenceware product that enables subscribers to browse, read, and search information needed for on-the-job performance support and problem solving. Since the data in the digitalized collections is from general sources and available to all customers, the information does not qualify for any tax exclusions because it is not personal or individual.
For all taxable software, the incidence of tax is the location associated with the license to use the software, and therefore tax should be collected where a customer’s employees will use the software in New York. If employees are located both in and out of New York, tax should be collected on the portion of the sale attributable to users located in state. (TSB-A-09(3)S, New York Commissioner of Taxation and Finance, January 29, 2009)