New York – Sales to Access Forms Stored on a Web Site

SALT Report 2805 – The New York Department of Taxation issued an advisory opinion regarding the application of sales and use tax to access to online digital forms.  The Taxpayer developed software that allows its customers to access various form templates on its web site. By connecting to the web site, the customer can pull-up and populate a specific form with its own data.  If the customer has entered data onto the form, the form can be downloaded to the customer’s computer and printed at the customer’s location.

The Taxpayer requested a ruling from the Department to determine if providing access to forms that can be populated through the Taxpayer’s web site is considered the taxable sale of prewritten software.

In its ruling, the Department referred to Regulation § 526.7 which provides that “a sale is taxable at the place where the tangible personal property or service is delivered, or the point at which possession is transferred by the vendor to the purchaser…”

And, Regulation § 526.7(e)(4) which provides that with respect to a “license to use,” a transfer of possession has occurred if there is actual or constructive possession, or if there has been a transfer of “the right to use, or control, or direct the use of tangible personal property.”

In either situation, the Department stated that the location of the software, either on the Taxpayer’s servers or downloaded to the customer’s computer, is irrelevant because the software can be used just as effectively by the customer even though the customer never receives the code in a tangible medium or by download.

Further, even though the Taxpayer’s customers do not have the right to “alter, change, or control” the software code itself, they do in fact, gain possession of the software and the “right to use, control or direct the use” of the software, because they have the right to alter the content by filling in the form.  Because of this, the Department concluded that when a customer pays to access a form through the Taxpayer’s web site, it is considered the taxable sale of prewritten computer software.

To determine the proper tax rate and jurisdiction, the Taxpayer should use the location associated with the license to use the software; for example, the location of the person who will be using the software.  However, if the person who will use the software is located both in and out of New York, the Taxpayer should collect tax based on the portion of the receipts attributable to New York locations.

For Further Information

New York Department of Taxation and Finance – TSB-A-13(22)S