Tax News Update    Email this document    Print this document  

June 24, 2021

Massachusetts high court allows corporation to retroactively apportion sales tax based on location of multistate software use

The Massachusetts Supreme Judicial Court (MA SJC) affirmed a decision by the Massachusetts Appellate Tax Board (MA ATB) allowing software vendors to use the state's abatement process to apportion sales tax on software sold to a customer for multistate use (Oracle USA, Inc. v. Commissioner of Revenue, No. SJC-13013 (Mass. Sup. Jud. Ct. May 21, 2021)).


Three software vendors sold or licensed software to a Massachusetts-based company (Company) and remitted tax to the state on the full value of the transactions. When the Company notified the vendors that only a portion of the software would be used in Massachusetts, the vendors submitted refund claims for the portion of the sales tax attributable to the software's out-of-state use. In doing so, the vendors followed the general abatement process of the Massachusetts Department of Revenue (MA DOR) in Mass. Gen. Laws ch. 62C, Section 37, which allows "any person aggrieved by the assessment of a tax … [to] apply in writing to the commissioner [of the MA DOR], on a form approved by the commissioner [of the MA DOR], for an abatement thereof" within a specified time.

Although the Commissioner of the MA DOR (Commissioner) did not dispute that the vendors' abatement applications "reflected the correct amount of sales tax that would have been due if the vendors had been permitted to apportion their remittances based on in-state use," the Commissioner nevertheless denied the vendors' claims on the ground that the vendors did not follow the apportionment procedure outlined in the MA DOR's regulations.1 Specifically, the Commissioner claimed that the vendors could not apportion their remittances because they had failed to comply with 830 Code Mass. Regs. Section 64H.1.3(15)(a), which requires a purchaser (e.g., the vendor) to submit a "multiple points of use" certificate to the seller at the time of purchase or "no later than the time the transaction is reported for sales or use tax purposes."2

On appeal, the MA ATB ruled in favor of the vendors. The MA ATB found that Massachusetts sales tax law provides a statutory right to apportion software transferred for use in more than one state and the commonwealth's general abatement process is "available to the vendors who paid sales tax in excess of that properly apportioned to sales in [Massachusetts]."

On appeal to the MA SJC, the Commissioner argued that Mass. Gen. Laws ch. 64H, Section 1 does not create a statutory right to apportionment; rather, it "empowers" tax authorities to determine whether to allow apportionment of sales tax when software is transferred for use in multiple states. Accordingly, the Commissioner claimed, tax authorities were authorized to deny apportionment to the vendors because they did not comply with the regulations.

The vendors countered that the statute expressly creates a right to apportion sales tax in a multiple-points-of-use scenario and that the statute only authorizes the tax authorities to decide how to apportion the tax.

MA SJC allows apportionment based on multistate use

In affirming the MA ATB's decision, the MA SJC noted that the relevant regulation3 does not expressly prohibit the tax from being apportioned through abatement. Rather, the MA SJC held that the provision merely requires the seller to pay the tax when due, as if there were no apportionment, and that this requirement does not preclude a seller from later seeking a timely abatement once the apportionment between software users in various states has been determined.

Further, the MA SJC explained, interpreting the regulations as providing nonexclusive ways in which a taxpayer may obtain apportionment does not render them meaningless, as the regulations merely provide a simple, efficient process for taxpayers to use in seeking apportionment at the time the sales tax is due. To the extent a taxpayer wanted to avail itself of the benefits of paying only the apportioned tax when the tax is due, the MA SJC continued, then the procedures set forth in the regulations must be followed or a presumption will apply that the full amount paid is subject to tax. In these instances, the seller must pay tax on the entirety of the sale when the tax becomes due and later seek an abatement for the apportioned amount.


While it is far easier and more efficient to deal with multiple-points-of-use scenarios by conforming to the procedures outlined in the Commissioner's regulations, the MA SJC's decision makes it possible to remedy overpayments retroactively, through the abatement process, when those procedures were not followed. Nevertheless, the decision should not be read as invalidating the procedural regulations under 830 Code Mass. Regs. Section §64H.1.3 Computer Industry Services and Products. Rather, as the MA SJC noted, the decision only allows an additional means of relief.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
   • Karl Nicolas (
   • Jason Zorfas (
   • Grace Kyne (
   • Robin O’Brien (


1 Under Mass. Gen. Laws ch. 64H, Section 1, "[t]he commissioner [of MA DOR] may, by regulation, provide rules for apportioning tax in those instances in which software is transferred for use in more than one state."

2 830 Code Mass. Regs. Section 64H.1.3(15)(a)(1), (2). The regulations also permit the seller to work with the purchaser to produce the correct apportionment when the seller knows that the software will be available for use in more than one jurisdiction, but the purchaser has not provided the required exemption certification. Under a third alternative, a purchaser that holds a direct-pay permit does not need to deliver an exemption certificate to the seller but instead, remit the apportioned tax directly to the appropriate jurisdictions.

3 830 Code Mass. Regs. Section 64H.1.3(15)(c).