Giving customers access to prewritten software may trigger New York state and local sales tax if the taxpayer's customers that use the software are located in New York under advisory opinion 20-22. The state generally imposes retail sales tax on sales of tangible personal property, which includes the sale of prewritten software. Certain services are non-taxable, however, when several distinct taxable and non-taxable items are sold together for one non-itemized price, sales tax is due on the total sales price charged.
In this case, the taxpayer's digital platform allowed customers access to certain software tools to create, deliver and manage their own digital advertisements, in addition to offering non-taxable services. The taxpayer approved the advertising campaign (once completed by the customer) and placed the digital advertisements using its network of third-party publishers. The taxpayer's receipts were generally based on the number of views any particular digital advertisement received. There was no specifically identified charge for access to the platform (i.e. the prewritten software), which otherwise would have triggered New York's sales tax requirement. Additionally, The taxpayer billed for all services (taxable and non-taxable) in a single receipt; there was no itemization of charges.
The advisory opinion concluded that the practice of not specifically charging customers for access to prewritten software for their own use triggered sales taxes on tangible personal property in New York to the extent that any of the taxpayers' customers' employees who use the software to create their digital advertising campaigns were located in New York. The tax was assessed on the total sales price charged due to the singular, non-itemized, invoices sent to the taxpayers' customers.