Key Takeaways
- DMA identified approximately $12 million in recoverable sales tax on Iron Mountain’s software purchases
- Massachusetts MPU rules allowed software costs to be allocated based on where employees actually used the software
- DMA managed recovery claims across approximately 22 software vendors
- Updated sourcing practices help prevent future software tax overpayments
Client
Iron Mountain is a global information management company with employees and operations across multiple jurisdictions. As the organization’s workforce became increasingly distributed, the locations where employees accessed and used enterprise software also shifted, creating a complex environment for tax payments.
Iron Mountain engaged DMA to conduct a Massachusetts sales and use tax payment review to identify potential recovery opportunities within its purchasing activity.
Challenge
During its review of Iron Mountain’s expense data, DMA identified significant sales tax being paid to Massachusetts on software used by employees both within and outside the state.
Iron Mountain historically paid Massachusetts sales tax on 100% of certain software purchases. However, Massachusetts provides a multiple points of use (MPU) exemption that allows qualifying software costs to be allocated based on where the software is actually used. As Iron Mountain’s workforce became more geographically dispersed, continuing to source the full amount to Massachusetts created a substantial overpayment opportunity.
Recovering those overpayments presented an additional challenge. In Massachusetts, refund claims of this type generally require coordination with the vendors that originally collected and remitted the tax. With the opportunity spanning approximately 22 software vendors, pursuing the recovery required extensive vendor outreach, documentation, and claim management.
Solution
DMA analyzed Iron Mountain’s software purchases and employee locations to determine the appropriate allocation of software use inside and outside Massachusetts. This analysis identified approximately $14 million in sales tax initially paid on the relevant purchases, with approximately $12 million determined to be eligible for recovery based on employee location apportionment.
DMA then managed the recovery process across the affected software vendors, prepared and substantiated claims, and worked directly with vendors to determine the appropriate refund mechanism. Depending on the vendor, this involved an amended return or authorization allowing DMA to work directly with the state. Beyond recovering historical overpayments, DMA also worked with Iron Mountain’s tax and accounting teams to correct the treatment of software purchases going forward. This included communicating the appropriate exemption documentation and sourcing information to vendors so Iron Mountain could self-accrue use tax in the jurisdictions where employees actually use the software rather than continuing to pay the full tax amount to a single jurisdiction.
Results
DMA identified approximately $12 million in recoverable sales tax and initiated refund claims across approximately 22 software vendors. The project also created value beyond the refunds themselves. By addressing the underlying sourcing and allocation issue, Iron Mountain is better positioned to apply the appropriate tax treatment to software purchases going forward—helping to optimize operations and prevent future overpayments.
Why DMA
Software tax recovery opportunities can be easy to overlook, particularly as employee locations, headquarters, and business operations change over time. Identifying the opportunity is only the beginning. Successful recovery requires an understanding of state-specific rules, detailed supporting documentation, and the ability to work effectively with software vendors and taxing authorities.
DMA’s experienced sales and use tax professionals have managed multiple points of use reviews and understand both the technical requirements and the practical process involved in pursuing these claims. Our established relationships with major software providers help move vendor-dependent claims forward, while DMA’s experience working with state tax authorities ensures claims are supported by the documentation regulators expect. By combining tax technical expertise with hands-on claim management, DMA helps organizations identify historical overpayments, pursue recoveries, and improve tax processes to reduce future exposure and unnecessary tax costs.
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