Software Developed for Internal Use but Sold in Bulk Sale Taxable in New York

The New York Division of Tax Appeals upheld a decision stating that a legal document storage company’s sale of a self-developed software program intended solely for self-use was a taxable sale of tangible personal property when transferred as part of a bulk sale of all of the company’s assets. New York defines pre-written software as all software that is not designed and developed to the specifications of a specific purchaser, which indicates that both canned and custom software may be considered pre-written. Therefore, although the software was certainly customized, it had not been designed and developed to the specifications of the bulk sale purchaser and consequently, was pre-written. Further, as clarified in a Technical Service Bureau Memorandum, software loses its identity as exempt software designed and developed for a specific purchaser when it is sold as part of a bulk sale. (Xerox Corp., New York Division of Tax Appeals, Administrative Law Judge Unit, DTA Nos. 821914 and 821915, April 23, 2009)

Posted on June 5, 2009