Maximizing Savings with the Multiple Points of Use (MPU) Exemption

The digital age has brought incredible advancements to businesses, but it has also complicated tax compliance, particularly when it comes to software purchases. One key opportunity for companies is the Multiple Points of Use (MPU) exemption, a little-known provision in sales and use tax laws. This exemption offers significant savings, especially for businesses operating across multiple jurisdictions.

What Is the MPU Exemption?

The MPU exemption allows businesses to allocate sales tax payments based on where software is used rather than where it is billed. This often results in a refund of sales tax overpayments on software purchases, especially for companies with employees spread across multiple states.

Why Companies Overpay Sales Tax on Software

Many software purchases, including licenses and cloud-based services like SaaS, PaaS, and DaaS, are subject to sales tax in certain jurisdictions. The problem arises when companies pay tax based on the billing location, assuming all software use occurs there.

In today’s post-pandemic world, with remote work on the rise, employees are often located across multiple jurisdictions. This discrepancy leads to overpayment of sales tax, as businesses are taxed for users in states that may not require such charges.


How to Qualify for the MPU Exemption

The good news is that any company can qualify, regardless of its industry or purpose of software use. The only requirement is that the software must be capable of being used in multiple locations or by multiple users. This exemption is particularly beneficial for businesses based in states like Illinois, Massachusetts, New York, Pennsylvania, Washington, and Utah.

The Savings Opportunity

Once identified, businesses have several options for recovering overpaid taxes:

  1. Refund Claims: Taxpayers can request a refund directly from the vendor or the state where the overpayment occurred.
  2. Audit Offsets: In cases of open audits, overpayments can be used to offset liabilities.

How to Claim a Refund

Recovering overpaid taxes may sound daunting, but it doesn’t have to be. Here are the steps:

  1. Analyze Purchases: Review company expenditures to identify software or cloud-based purchases that included sales tax charges.
  2. Gather Documentation: Collect invoices, contracts, usage agreements, and other relevant materials to support your claim.
  3. Leverage Technology: Tools like Source Advisors’ proprietary platform can simplify this process, minimizing resource strain while identifying refund opportunities.

Take Advantage of MPU Savings Today

Don’t let outdated tax practices drain your budget. If your company operates in states like Illinois, New York, or Washington and purchases software used across jurisdictions, you could be entitled to substantial tax refunds. Let Source Advisors help you navigate the process and maximize your savings.