On May 21, the Massachusetts Supreme Judicial Court issued its opinion in Oracle USA Inc. v. Commissioner of Revenue. The case addressed whether General Law (G.L.) Section 1 affords taxpayers the statutory right to apportion sales tax on purchases of software transferred for use in multiple states. The court further considered whether the general abatement process under G.L. Section 37 is available to taxpayers seeking apportionment on a retroactive basis.
The transactions at issue follow a familiar fact pattern in that the vendor and the taxpayer didn’t consider whether the entire value of the transaction was subject to tax in Massachusetts at the time the transaction was consummated. The taxpayer later notified the vendor that 83% of the value of the software was used outside Massachusetts, at which time the vendor applied for refund via the general abatement process.
The commissioner denied the application for refund on the grounds that the taxpayer failed to follow apportionment regulations that require taxpayers to provide a multiple points of use certificate at the time of purchase.1 The commissioner further contended that the permissive use of the word “may” in G.L. Section 1 allowed the commissioner to determine whether to allow apportionment.