In a previous edition of this column, we addressed the often murky distinction for sales tax purposes between the taxable sale of intangible software and the non-taxable sale of certain services. See ‘MarketShare’ Acknowledges Challenge of Distinguishing Consulting, Information Services, and Software, NYLJ (March 1, 2021). In a recent Tax Appeals Tribunal decision, Strata Skin Sciences, DTA No. 828704 (Tax App. Trib., May 5, 2022), the Tribunal wrestled with, among other issues, distinguishing the lease of tangible personal property provided with certain support services from the provision of services.

In Strata, petitioner was in the business of manufacturing and providing the use of technology known as an “XTRAC laser,” along with certain support services. The XTRAC laser was medical equipment used in the treatment of certain skin conditions. Rather than making an upfront payment or regular fixed payments for the use of the laser, a physician would pay petitioner on a per-treatment basis by purchasing “treatment codes” from petitioner. The physician would need to enter a code into the laser prior to each use in order to operate the laser. The physician would make no other payment with respect to the laser or the support services provided along with the laser (discussed below).

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