Another state has bravely come forward with clear guidance on the taxability of cloud computing (i.e., Software as a Service (“SaaS”), Platform as a Service (“PaaS”), and Infrastructure as a Service (“IaaS”). On January 21, 2014, Nebraska issued an updated version of its “Sales and Use Tax Guide for Computer Software” and advised that “charges for services which allow customers to remotely access software applications, operating systems, servers, and other network components via the Internet or other online connections are not taxable. This is true regardless of whether the software, hardware, or network components are located in Nebraska or outside the state.”
Nebraska’s directive comes on the heels of New Jersey’s recent issuance of Technical Bulletin 72 (7/3/2013), which similarly determined that SaaS, PaaS, and IaaS were not subject to New Jersey sales and use tax to the extent that such services did not constitute the sale of tangible personal property. Both Nebraska and New Jersey are Streamlined Sales Tax Member States, and have adopted the same definition of both tangible personal property and prewritten computer software.
New Jersey and Nebraska’s determination that cloud services are not the sale of prewritten computer software is particularly noteworthy given the appeal pending in Thomson Reuters v. Dep’t of Treasury, Case No 11-91-MT (Mich. 1/23/2013). Michigan, also a fellow Member State, has taken the position that Thomson’s on-line information service is pre-written computer software even though no software is transferred to Thomson’s customer. This appeal will be one worth following, particularly given the clear guidance now issued by fellow SST member states.
Other recent “Cloud, Software & Digital Tax” posts by Carolynn Iafrate Kranz:
- Texas SaaS: Text & Messaging are Taxable Data Processing Service
- SaaS Characterized as Taxable Telecommunications Service
- Pennsylvania Tax on Software Support Services: Ruling Re-issued
- Illinois Finally Rules on SaaS
- Tennessee’s Situsing of Accessed Software Runs Afoul