Vermont will impose its sales and use tax on sales of remotely accessed software effective July 1, 2024 (Bill H.887).  Vermont’s governor originally vetoed the bill, but the legislature overrode the veto on June 17, 2024. Vermont’s definition of “tangible personal property” includes “prewritten computer software,” but the legislature had enacted an exemption for remotely accessed software in 2015.  The new legislation expands the “tangible personal property” definition to cover prewritten computer software “regardless of…

On April 12, 2021, Maryland legislators passed Senate Bill 787, which proposed several significant amendments to Maryland’s digital ad tax (see Maryland Passes Digital Advertising Gross Revenues Tax After Overriding Veto). Governor Larry Hogan declined to take action with respect to signing or vetoing Senate Bill 787. As a result, the legislation automatically became law, effective May 12, 2021. Most notably, Senate Bill 787 delays the effective date of the digital advertising tax to tax…

In overturning the Commonwealth Court, the Pennsylvania Supreme Court recently held that royalty fees for certain intellectual property were not subject to Pennsylvania sales tax. See Downs Racing LP v. Commonwealth of Pennsylvania, Dkt. No. 70 MAP 2017 and 71 MAP 2017 (Pa. Oct. 25, 2018).  The royalties at issue were payments between third parties for IP used in the operation of gaming machines (“Gaming IP”).  The Commonwealth argued the Gaming IP was canned software, and thus taxable in Pennsylvania.  The Commonwealth also argued, in the alternative, that sales tax was due on the full price paid for the gaming machines along with any ancillary items, such as the Gaming IP.  In siding with the taxpayer, the court found the Gaming IP was not subject to sales tax because it did not constitute, nor was it ancillary to, tangible personal property.

The Arizona Department of Revenue (“Department”) recently made public Letter Ruling 16-011 (“Ruling”), which concluded that a taxpayer’s gross income from electronic transaction processing services that involved the use of software was not taxable for Arizona transaction privilege tax (“TPT”) purposes.  The Department opined that the electronic transaction processing services were not taxable as a rental of tangible personal property because the taxpayer’s customers did not have the “exclusive control” over the software required for a taxable rental.  This Ruling is significant because the Department, like revenue departments in several other states (including New York), has historically concluded that online services involving the remote access or use of software were subject to the TPT as a rental of tangible personal property, without analyzing the degree of control the customer had over the software.