New York Sales Tax on Software

Sales tax, the stuff that keeps you awake at night.   In New York, you are required to collect sales tax from your customers on receipts from the sale or rental of tangible personal property and certain services (except for food, drugs and medicine).  Tangible property is usually stuff that you can touch.  What about computer software?  You can't really touch it,  so do you have to pay sales tax on the sale or license of software?  

  

"Section 1101(b)(6) of the Tax Law provides that prewritten software is deemed to be tangible personal property for sales tax purposes. The fee paid for the lease or license to use or consume prewritten computer software, regardless of the medium by means of which such software is conveyed to the purchaser, is subject to New York State sales tax under Tax Law §1105(a). The location of the code embodying the software is irrelevant, because the software can be used just as effectively by the customer, even though the customer never receives the code on a tangible medium or by download."

But would you know that sales tax is also due on fees paid for playing computer games in a restaurant type establishment?  A recent opinion from the New York State Department of Taxation explains why.

To get started selling any of the items that require you to collect sales tax, get a Certificate of Authority from the New York Tax Department and learn when and how you have to pay the sales tax that you collected.

Dealing with sales tax collection and payment is a major hassle, because, among other things, the tax rates vary by locality.  

**This post is for informational purposes only and does not constitute legal advice**

About Imke Ratschko


Imke Ratschko is a New York Attorney helping small businesses, business owners and entrepreneurs with all things "Small Business Law," such as litigation, contracts, business owner disputes, shareholder and operating agreements, sale or purchase of a business, investors, and starting a business. You can reach her at 212.253.1027.

6 comments

  1. want to find more about taxes? hey hey… visit Romania :) you`ll be delighted :))

  2. Hmmm this is just not right..

  3. Tax due when I sell my share of the 40% of currently owned home?

  4. Don’t worry, Jim. Have never seen a ‘Red Rocket’ or ‘Dynamite’ yet without a little white. They’re like that all over my neighborhood.

  5. Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming.