The New York State Division of Tax Appeals concluded the sale of software-as-a-service and managed services is taxable as the sale of prewritten software. Prewritten software, when sold together with the companies‘ services, is significant enough to be considered taxable.

The bottom line: Businesses should pay close attention to how they market, sell, and price their services in New York State, especially if they are offering services along with software. Some businesses will want to consider unbundling and charge separately for otherwise non-taxable services and software licensing to avoid tax exposure.