Software Vendor Challenges Massachusetts’ Restrictive Policy on Multiple Points of Use Certificates


Software purchasers that have paid Massachusetts sales tax on the full purchase price for software that was also concurrently available for use by employees outside Massachusetts, should consider filing protective refund claims awaiting the resolution of pending litigation at the Appellate Tax Board challenging the Department’s policy regarding multiple points of use ("MPU") certificates. Specifically, a software vendor is contesting (on behalf of a purchaser) the Department’s position that a purchaser’s failure to provide an MPU certificate to the vendor at the time of purchase bars the purchaser from later claiming MPU apportionment on software purchased from the vendor through a refund claim.

By way of background, Massachusetts’ sales tax regulations permit MPU apportionment for purchases of software. MPU apportionment applies to purchases of prewritten software if the software will be concurrently available for use by the purchaser in multiple jurisdictions.1 For example, if a purchaser can establish that prewritten software delivered on disc to the purchaser’s Massachusetts headquarters was concurrently available for use by its employees inside and outside of Massachusetts, then Massachusetts sales tax, under MPU apportionment, would only apply to the percentage of the purchase price attributable to the Massachusetts users.2

Taxpayers can establish eligibility for MPU apportionment at the time of the purchase by providing the vendor with an MPU certificate or a certification that the software will be used in multiple jurisdictions. This relieves the vendor of responsibility for collecting the tax, and the purchaser is then responsible for remitting the apportioned use tax as required by the tax laws in the states where the software is used. If the purchaser does not provide the certificate or certification by the time the vendor is required to remit the sales tax to Massachusetts, then the vendor must collect and remit tax on the full purchase price.

What is surprising—not to mention inconsistent with the Department’s own internal guidance regarding the treatment of other exemption certificates—is that the Department is taking the position that a purchaser’s failure to provide an MPU certificate to the software vendor at the time of purchase is a procedural bar for any later refund claim. This position is being challenged at the Appellate Tax Board by a software vendor seeking a refund on behalf of one of its customers. According to its petitions, the vendor is seeking a refund on behalf of one of its customers because the vendor collected and remitted Massachusetts sales tax on the full purchase price, when 83 percent of its customer’s employees who used the software were located outside of Massachusetts. The vendor alleges that the Department denied the refund claims because the purchaser failed to provide the vendor with an MPU certificate at the time of purchase.

The taxpayer is challenging this policy on the basis that Massachusetts’ sales tax statute authorizes apportionment for software purchases for use in more than one state, and this statutory authority is not made contingent on the type or timing of documentation provided by the purchaser. Thus, the taxpayer is arguing that the Department’s current MPU certificate policy exceeds the authority granted by the Legislature to promulgate rules of apportionment for software purchases.

In addition to arguably exceeding statutory authority, the Department’s policy regarding MPU certificates appears to be much more restrictive than the Department’s policies regarding other types of sales and use tax exemption certificates. Outside the MPU context, the Department’s audit manual provides auditors with the flexibility to document exempt transactions with documentation other than contemporaneously obtained exemption certificates. The Department also instructs auditors to permit additional time for vendors to secure certificates well after the sale date for other exemptions—even if that additional time is not explicitly permitted by the governing regulation. It is unclear why the Department is not allowing the same reasonable discretion in documenting claims for MPU apportionment that it is allowing for other types of sales and use tax exemptions.

Taxpayers that have purchased software and paid Massachusetts sales tax on the full purchase price should review whether that software was actually concurrently available for use in other jurisdictions. If so, they should arrange for the filing of protective refund claims regardless of whether they provided an MPU certificate to the vendor at the time of purchase.

If you would like to receive updates regarding the pending MPU litigation in Massachusetts, or if you have questions about any of the issues discussed in this update, please contact the authors of this alert, or the Reed Smith lawyer with whom you usually work. For more information on Reed Smith's Massachusetts tax practice, visit

1. 830 CMR 64H.1.3(15).
2. Id.

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