Massachusetts’ Supreme Judicial Court held that receipts from subscriptions to remote access software were subject to sales tax as taxable transfers of prewritten software. Following a change in the law to tax sales of prewritten software regardless of medium of delivery, the Massachusetts Department of Revenue promulgated a regulation stating that such taxable sales include “transfers of rights to use software installed on a remote server.” In holding the remote access software was taxable, the Court deferred to the Department’s interpretation of law, as reflected in the regulation, noting that such interpretation is “rational” based on the legislative intent to tax prewritten software regardless of the medium of delivery. The Court, however, specifically noted that the taxpayer did not challenge the regulation as ultra vires (illegal because it is contrary to the statute). Finally, the Court held that the subscriptions to online products were not non-taxable services because the object of the transaction was acquiring access to the software.
Citrix Systems, Inc. v. Commissioner of Revenue, SJC-12741 (Mass. Feb. 5, 2020).