Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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A

120.0000 AUTOMATIC DATA PROCESSING SERVICES AND EQUIPMENT—Regulation 1502

Annotation 120.0103

(a) IN GENERAL

120.0103 Data Processing Services. A company is engaged in selling turnkey computer packages with the use of the software programs being licensed to the user with no privileges of reselling the software program. Sales tax is charged on the entire package including both hardware and software and on charges for any subsequent modifications or enhancements made to the software program after the initial installation. It was asked whether sales tax applies to the following transactions:

(1) (a) Repair to software programs which have become garbled or damaged due to environmental conditions. The repair only restores the program to its original condition and does not improve or modify it.

(b) Similar repairs to data files.

Assuming the "repair" is accomplished by furnishing the customer a new disk or tape on which is recorded the "repaired" program or data file, for which a charge is made, both types of transactions are subject to tax. The tax applies for the same reason that it would apply to the sale of a duplicate disk or tape on which has been recorded a program or data file. It is simply the transfer for a consideration of tangible personal property and constitutes a taxable sale.

(2) The enlargement of a data file due to a customer's growth where there is no change in, or addition to, existing programs.

Assuming that "enlargement" means that for a fee the customer is provided a new disk or tape with the enlarged data file recorded on it, the transaction is subject to sales tax for the same reasons set forth in 1 above. 5/18/81.