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 120.3044

(c) CUSTOM PROGRAMS

120.3044 Basic Operational Program—Custom Computer Program. A "basic operational program" as defined in section 995.2 of the Revenue and Taxation Code means, among other things, a computer program which is fundamentally necessary to the functions of a computer, and is specifically excluded from the definition of a custom computer program. By contrast, application programs are not basic operational programs. Under section 995.2, MS-DOS, OS/2, and UNIX are basic operational programs. APPLETALIC may or may not be a basic operational program, depending upon whether it is an integral part of Apple Computer's operating software. Whether any particular utility program is or is not a basic operational program would depend upon whether it meets the section 995.2 definition. These definitions of basic operational programs are used in determining whether a computer program is a "basic operational program" as that term is used in Regulation 1502.

If custom modifications to a basic operational program are developed, sales or use tax applies to the charges if the modifications are transferred on storage media to the customer. If an entirely new custom computer program is developed which is a basic operational program, sales or use taxes will apply to the charges if tangible storage media is transferred to the customer. 9/18/89.