Earlier in 2017, Premier Netcomm Solutions LLC (“Premier”) lost on reconsideration in New Jersey tax court. The case dealt with the taxability of software as a service (“SaaS”) dating back to an audit from 2004 through 2005. After initially beating for state, the court overturned a prior decision on reconsideration, which ultimately upheld New Jersey’s tax assessment.
Premier seems to be a classic IT provider in that it provides services such as network supports, internet access, consulting and design of IT and telephone projects, trouble shooting, remote training, data back-up, and network monitoring for businesses. In the original decision, the court sided with Premier that its sales were not subject to sales tax. The court concluded that prior to 2005, sales of services related to prewritten software were not taxable. In so doing the court invalidated New Jerseys tax assessment against Premier.
Unhappy with the decision, New Jersey’s Division of Taxation sought reconsideration, which is very difficult to prevail on. The Court seemed to grant reconsideration because the original case erred fundamentally on its analysis. Primarily, the court originally believed the law did not tax such services until its 2005 amendment. However, the amendment was really based on New Jersey’s membership into the Streamline Sales and Use Tax Agreement (“SSUTA”) in 2005, which required it to adopt a uniform definition. Therefore, based on a 2004 Bulletin, the court reconsidered the case and ruled that the services were and have been subject to tax since 2004.