Companies with employees around the country typically have multiple points of use for their software purchases. As with other commodities, many states have taken the liberty to tax software products and services, including Massachusetts. However, when it comes to exemptions, some states make navigating sales tax on software easier than others. For instance, by using the Massachusetts Multiple Points of Use (MPU) exemption certificate, purchasers can minimize their sale tax obligations in the state.
This article will address how to handle sales tax on software purchases in Massachusetts, when to provide a Multiple Points of Use (MPU) certificate, and how to investigate possible sales tax refunds due to you from the state.
Purchasing Software in Massachusetts
Most companies must pay sales tax on prewritten software purchased in Massachusetts. While some states only tax specific software delivery methods, Massachusetts mandates sales tax on most types. These include electronically delivered, load and leave, licenses and leases, transfers of rights to use software installed on a remote server, upgrades, and license upgrades.
For companies buying large quantities of software in Massachusetts, the sales tax can add up fast!
When to Provide a Multiple Points of Use Certificate
A Multiple Points of Use certificate may be applicable when buying prewritten software in Massachusetts and using it in and outside of the state.
At the point of sale, the purchaser should provide an ST-12 certificate to the vendor. While the vendor should no longer collect the sales tax on the invoice, the purchaser must accrue and remit use tax in the states where software is taxable and used by an employee.
Claiming a Sales Tax Refund in Massachusetts
If your company was eligible but did not provide a Multiple Points of Use certificate in the past, you might be able to receive a refund in Massachusetts for overpaid sales tax on prewritten software purchases.
Prior to a May 2021 Massachusetts Supreme Court decision, taxpayers could not successfully file for Massachusetts MPU refunds using allocation methods. Fortunately, the court’s ruling paved the way for Massachusetts-based software purchasers to allocate tax correctly and request refunds for sales tax mistakenly charged and paid.
Have you overpaid sales tax in Massachusetts?
At PMBA, we help our clients:
- Identify states where Multiple Points of Use certificates apply
- Take the guesswork out of filing a sales tax refund claim
- Prevent future tax overpayments from occurring