The New York State Department of Taxation and Finance has issued TSB-A-19(1)S which found that an online marketplace which sold software on behalf of third-party sellers could be viewed as a co-vendor liable for the collection and remittance of sales tax on the sales of prewritten software. The opinion states that if the marketplace collects and remits sales tax on the sales of the software then the third party seller would not liable for the sales tax. The marketplace is only liable if the third-party seller would also be considered a vendor in New York. At this time, it is unclear how both marketplaces and marketplace sellers would go about reporting on sales where the tax is collected by the marketplace.
While the opinion is fact specific, the legal analyses does not limit its application to sales of software, instead viewing the sale of prewritten software as a sale of tangible personal property. Given the recent decision of the Department to begin enforcing liability for sales tax on out of state sellers of tangible personal property, this opinion greatly increases the potential liability of online marketplaces in New York. The issuance of this advisory opinion appears to jump ahead of a proposal in Governor Cuomo’s budget which would have imposed similar liability on marketplaces. Sovos will continue to track and report on any additional developments in New York.