The Massachusetts Appellate Tax Board recently determined that Akamai Technologies, Inc., a Software-as-a-Service (SaaS) provider that did not license its software-based solutions, developed standardized, remotely accessed computer software products that it sold to its customers. As a consequence, due to stipulations agreed to by the parties, Akamai should be classified as a manufacturing corporation for local property tax purposes and treated as being substantially engaged in manufacturing for corporate excise purposes.
This classification affords Akamai a local property tax exemption on its machinery used in the software development process. Such treatment requires Akamai to apply a single-sales factor apportionment formula when determining its taxable net income and when calculating its franchise tax. Further, due to the stipulations, Akamai is eligible for an investment tax credit on purchases of qualifying property.
