Client Alert

Michigan Court of Appeals Holds that Checkpoint Online Research Service Is Not Subject to Use Tax

15 May 2014

On May 13, 2014, just five weeks after our oral argument, the Michigan Court of Appeals reversed a Court of Claims decision and found that Thomson Reuters was not liable for use tax on sales of its Checkpoint online research service to Michigan customers. Thomson Reuters (Tax & Accounting) Inc. v. Department of Treasury, No. 313825 (Mich. Ct. App.  May 13, 2014). The Appellate Court, finding “unpersuasive” the lower court’s reasoning that the service was taxable because prior versions of the product provided in print and on computer disks were taxable, held that any transfer of tangible personal property was  “incidental to service” under the test established by the Michigan Supreme Court in 1994 in Catalina Marketing. The Court expressly noted that customers were seeking not computer software but the “expert knowledge of Checkpoint’s content creators in synthesizing, compiling, and organizing the materials...,” finding that customers did not seek to own or have responsibility for the computer software.

For a copy of the decision, click here.

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