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 120.3100

(c) CUSTOM PROGRAMS

120.3100 Customized Computer Programs. A company claimed that the software it sold qualified as customized computer programs, because they contained information unique to each customer. The unique information included the tax rate in the buyer's state, passwords, telephone numbers, provider numbers, hospitals, specialties, social security numbers, federal identification numbers, insurance forms utilized, office locations, and fee schedules.

The work of adding customer names or file headings to an existing computer program does not make the program a custom program. No separate charge was made for customizing the program, nor was there any evidence that the cost of the customization was more than 50 percent of the total contract price (See Regulation 1502 (f)(2)). The determination that the program sold by the company was prewritten, was further bolstered by the fact that more than one-half of the programs they sold, were sold for the same price. The price charged was too low to provide for the effort of creating a new custom program and the set price was indicative of a prewritten program rather than a custom program. 11/6/92.