US – New York Supreme Court: SaaS Fees Taxable as Prewritten Software 

On January 15, 2026, the New York Supreme Court, Appellate Division, affirmed a Decision of the New York Tax Appeals Tribunal from May 2, 2024, and affirmed the sales tax assessment of access to the proprietary vendor management system. 

The Court upheld the 2024 decision that clarified taht fees charged by the service provider for access to the online vendor management system are taxable as prewritten software, even though the platform is delivered through a SaaS model and is mixed with other services. 

The Decision strengthens the Revenue Department’s position that online access to cloud-based services is taxable when customers are paying for the right to use the software. 

Case

The case featured a Florida-based service provider that facilitates connections between customers and contingent labor suppliers. The service provider argued that it provided non-taxable online services, whereas one of the main arguments against the Court’s decision was the application of the primary function test to sales tax treatment. 

The Court upheld the Tribunal decision, arguing that the customer’s access to and use of the vendor management system constitutes a taxable sale of prewritten software under sales tax law. 

The court held that the online delivery of software under the SaaS model doesn’t change its taxability. SaaS fees in this case are subject to New York sales tax as a prewritten computer software. 

Impact 

New York sales tax treats prewritten computer software as tangible personal property, even when delivered electronically. Providers of prewritten computer software to New York customers should diligently review the relevance of the software in their customers’ overall service offering, now with even higher scrutiny when the access to SaaS is bundled with other services seen from the “eyes” of the service provider as central, and not incidental. 

The ruling illustrates that fees that guarantee only access to the prewritten computer software could impose sales tax duty

Bundling prewritten computer software(taxable tangible personal property -SaaS in this case) with other non-taxable services doesn’t, per se makes the bundled transaction tax-exempt. The Court emphasized that the language terminology used in contractual terms for software licensing must be clearly defined. 

Impact: Service providers

The ruling of the New York Supreme Court shall impact the: 

• SaaS providers with customers in New York 
• Businesses that offer bundled services and prewritten computer software