Minnesota sales tax ruling stands; up to $17M on lineST. PAUL, Minn. (AP) — The Minnesota Department of Revenue said Tuesday it won't appeal a court loss in a long-running sales tax dispute, a decision that could come with a multi-million dollar price tag for state government.
By: BRIAN BAKST, Associated Press, Associated Press
ST. PAUL, Minn. (AP) — The Minnesota Department of Revenue said Tuesday it won't appeal a court loss in a long-running sales tax dispute, a decision that could come with a multi-million dollar price tag for state government.
Deputy Commissioner Matt Massman told The Associated Press that the agency is letting a September court ruling stand. It's a victory for software company SAP Retail, which vigorously opposed more than $500,000 in sales tax assessments. But the state might be out money from companies that are similarly situated, though the tax agency will have to revisit their tax bills on a case-by-case basis.
"At this point, the Tax Court has spoken," Massman said. "We're going to live with this decision for this narrow tax scenario."
The state expects $17 million to be its maximum exposure. Massman said tax privacy laws prevent him from describing how many companies might have their tax burdens refigured. He said the department doesn't plan to provide special notice to those potentially affected by the ruling. He indicated that some might have already had appeals pending.
SAP sold software to Best Buy, which also purchased consulting services to customize it. In 2010, under a previous administration, the Revenue Department determined SAP owed extra sales tax because the consulting services were not specifically exempted from the tax. At one point, the state wanted $721,000 in additional taxes, but that figure moved as the case wore on.
Minnesota collects sales tax on the sale of software and installation of it.
The company challenged the tax collector's decision, arguing that the software license and consulting services are sold separately and shouldn't be considered combined for purposes of the software's value. In siding with the company, the Minnesota Tax Court distinguished between SAP's consulting and standard installation.
Walter Pickhardt, a Minneapolis-based attorney for SAP, said the Newtown Square, Pa., company had no comment on the Minnesota decision.