The taxpayer, Catalyst Repository Systems, Inc. (“Catalyst”) is a Colorado-based electronic data and document repository corporation that provides litigation support services to its clients. Catalyst provides its clients with the use of its system, which includes its proprietary software and the use of its technical personnel, in order to acquire, store, sort, filter, organize and ultimately find and retrieve the documents its clients require, typically in response to demands for discovery arising through litigation, governmental requests or regulatory inquiries. Catalyst maintains all of its servers and computer infrastructure in Colorado. The vast majority of its employees are also located in Colorado.
On its returns for tax years 2008 through 2010 (the “Audit Period”), Catalyst sourced its online litigation support service receipts entirely to Colorado, based on the location where the service was performed. The Department conducted an audit and assessed additional Tax against Catalyst for the Audit Period, based on the position that Catalyst’s litigation support service receipts should be reclassified as “other business receipts,” rather than as receipts from services, and sourced to New York-based on customer location.