The New York Supreme Court, Appellate Division, affirmed a decision of the Tax Appeals Tribunal, which determined that a company’s charges for a proprietary technological platform, referred to as a “vendor management system” (VMS), constituted licenses to use prewritten computer software that were subject to sales tax. The company matched clients with suppliers of contingent and temporary labor and provided services associated with the management, retention and invoicing of the labor. To provide the services, the company used the VMS, access to which was controlled by agreements with each client and each labor supplier. The company maintained that it was not selling software licenses, but that it was providing nontaxable services to customers through its VMS platform. The court rejected the company’s argument, finding that various client agreements demonstrated that the company provided its customers the “right to use” software and, accordingly, a license to use software within the meaning of the New York sales tax law. The court also upheld the Tribunal’s determination that the use of the VMS software was “central” to the company’s services, rather than incidental, concluding that there were no grounds to disturb the Tribunal’s determination that the license provided by the company was the “core function of the transactions at issue,” rendering them subject to tax as a sale of tangible personal property.
