Sales Tax – Software

Relator challenged the decision of the Minnesota Tax Court upholding the Commissioner of Revenue’s assessment of sales tax on relator’s software sales. Relator argued that its software sales are nontaxable because modifications relator made to its software removed it from the definition of “prewritten computer software.” In the alternative, relator argued that it had reasonable cause to believe that its software sales were not taxable. Accordingly, relator contended that the Tax Court erred by upholding the Commissioner’s order imposing late-filing and late-payment penalties. The Supreme Court held that (1) the taxpayer’s software sales are taxable as “prewritten computer software” as defined in Minn. Stat. sec. 297A.61, subd. 17, because the taxpayer did not separately state its customization charges; and (2) because the taxpayer did not establish “reasonable cause” under Minn. Stat. sec. 270C.34 (2012) to believe that the taxpayer’s software sales were nontaxable, the Commissioner did not clearly err by assessing late-filing and late-payment penalties. Affirmed.

A14-0254 LumiData, Inc. v. Comm’r of Revenue (Tax Court)

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