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archive:bbs:nystaxes
              I M P O R T A N T  N E W S  R E L E A S E
              -----------------------------------------
             F R O M  M O D E M N E W S  M A G A Z I N E
                         September 10, 1991

ModemNews recently became aware of the following message, among many that have been circulating on the boards recently;

 Dave Harnett #1 @9450 Tue Aug  27 19:26:21 1991
 Information from the New York State of Taxation and Finance
 (publication number N-91-34 ? dated 7/91)
 "Effective September  1, 1991, all prewritten software will be 
 subject to New York State and local sales tax.  The sale of 
 prewritten software includes any transfer of title or possession, 
 any exchange, barter, rental, lease or license to use, including 
 merely the right to reproduce.  The only software which will now be 
 considered exempt is software designed or written to the 
 specification of a specific purchaser. The medium by which the 
 software is transferred to the purchaser has no effect on its 
 taxability."

Okay, so there you have it in part. Many readers called us and asked our opinion on the subject and we have done better than that, we have gone right to the New York State Division of Tax and Finance.

According to Spokesperson Paul Rickard, the writer of the previous message is correct, yet the interpretaion is not nearly as sinister as it seems. Let us try to explain to you what this new tax statute will mean to the average SysOp and BBS caller in the Empire State.

What this law does, is simply add software to the list of items which is now covered by the NYS Sales Tax laws. Just as you would pay State sales taxes on software you purchase in a retail store, so you would now also pay sales taxes on software that was written and sold to a customer in New York State.

This means that as an author of software, you are now responsible to collect the normal sales tax due the state. For example, you create a software package called "FILENAME", and you live in Albany, New York. You release this software as shareware and it finds it's way onto BBS's across the state and across the nation. So far, no problem. John Doe of Binghamton downloads this software from a BBS, likes it, and does his duty and sends you the registration fee. At this point, since the SALE WAS MADE WITHIN THE STATE OF NEW YORK, you are responsible to collect sales taxes on that sale. Simple. Had the purchaser been a resident of Albuquerque, you would not have to collect sales taxes from him.

What does this mean for SysOps? Here is where things get confusing.

If a System Operator considers his BBS as "hobby", this means that he does NOT use the BBS as a business expense, and does not solicit fees for use of the system, he will still fall outside this new statute and nothing need change. If however, the SysOp does solicit funds to run his BBS, then he is classified as an "Information Service" and then must collect sales taxes on the received fees and file his BBS activities along with his NYS Tax forms, usually as a simple business.

To sum this all up in a manner that all will understand, the simple transfer of files between a BBS and a caller may remain unaltered and unchanged in the current manner. However, if a software author resides in New York State and he sells his software to a user who LIVES IN New York State, then he is required, by law, to collect sales taxes on that sale, just as any other small or large businessperson.

If we at ModemNews can be of further service to you, either in interpreting this statute, or in getting you further information please feel free to contact us either at our BBS (516) 679-0674 or via our Conference on RelayNet.

Jeff Green, Publisher ModemNews Magazine

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