Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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A

120.0000 AUTOMATIC DATA PROCESSING SERVICES AND EQUIPMENT—Regulation 1502

Annotation 120.0013

(a) IN GENERAL

120.0013 Charges Associated with Computer Software. Information was requested regarding the application of sales tax to the following:

(1) Consultations with clients and training seminars held on site at offices.

The charge for merely consulting or providing seminars, without the transfer of tangible personal property in connection with consultation or training is nontaxable.

(2) A monthly charge billed to the clients for telephone support and periodic updates of software.

The charge for a software maintenance contract, which provides updates and future releases, is a contract for the sale of tangible personal property and is taxable. If maintenance cannot be acquired by the client without telephone support, the telephone support (consultation) is part of the gross receipts and is subject to tax. (See Regulation 1502.)

(3) Special programming that is done in office and sent to clients via the phone lines using a modem.

If information is provided to a client by remote telephone modem, the charge is nontaxable. 3/12/92. (Am. 2004–2).

(Note: Regulation 1502 was amended so that beginning January 1, 2003, 50 percent of the charge for optional software maintenance agreements is subject to tax. Prior to that date, generally 100 percent of the charge was subject to tax.)