Reed Smith Client Alerts

The Massachusetts Supreme Judicial Court (SJC) has affirmed a Massachusetts Appellate Tax Board (ATB) decision allowing taxpayers refunds of sales tax paid on software, based on the application of the Commonwealth's multiple points of use sourcing rules.1

This finally brings to an end a multi-year saga, in which the ATB originally decided the case against the taxpayer in 2017, then reconsidered and reversed its initial decision on its own motion in 2019. The ATB upheld its revised decision on reconsideration, and when the Department appealed to the Appeals Court, the SJC took the case for direct review.

The case involved refund claims for tax paid on software purchased by a Massachusetts-based business (Hologic) from three different vendors. In each of the claims, the vendor (on behalf of Hologic) was seeking a refund of sales tax on sales of software to Hologic, based on the application of the Commonwealth's multiple points of use sourcing rules. Our alerts from 2017 and 2019 provide more detail on the history of the case.

The SJC upheld the ATB decision that the Legislature had granted taxpayers a statutory right to apportion sales tax on sales of taxable software used, in part, outside of Massachusetts. Although the Department had been delegated authority to issue regulations implementing this statutory right, the Department could not preclude taxpayers seeking apportionment through the refund process, rather than through the exemption certificate process outlined in the regulations.

This decision creates a refund opportunity if your business purchased software (including SaaS) and paid Massachusetts sales tax on the full purchase price. If any of the purchased software was concurrently available for use in jurisdictions other than Massachusetts, you should request that the vendor file protective sales tax refund claims on behalf of your business, or request a power of attorney that would allow your business to seek the refunds directly.

  1. Oracle USA v. Commissioner of Revenue, Docket No. SJC-13013 (May 21, 2021).

Client Alert 2021-149