Sales taxes present a particular problem for those companies that sell and purchase software that is to be concurrently used in multiple tax jurisdictions, since the sales tax for this transaction should ideally be remitted to multiple tax jurisdictions.The issue can be eliminated by obtaining a multiple points of use certificate (MPU) from the state government. This document accomplishes the following two items:
- The seller of the software is not required to collect a sales tax on the sale transaction.
- The buyer of the software is required to pay a use tax on its software purchase. The buyer apportions the amount of the use tax among the applicable tax jurisdictions where the software is to be used. The apportionment method can be based on any reasonable method, as long as it is applied in a consistent and uniform manner, and the method can be justified through supporting records.
A simple apportionment method that should be easy to justify is to base the allocation on the number of software users in each tax jurisdiction.
Several other issues related to the MPU are:
- Applicability. The MPU is currently allowed for pre-written software that is delivered by electronic means. The MPU does not apply to software that has been pre-loaded on a computer when the computer is sold.
- Usage. The MPU is part of the Streamlined Sales and Use Tax Agreement, so it should become more widely used as the Agreement is gradually accepted among more state governments.
- Wider use. A few tax jurisdictions have adopted a more broad interpretation of the MPU, allowing it to be applied to the sale of computer projects or services, usually involving the sale of digital products.