Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 180.6000

180.6000 Sale of Software Packages by Local Tax Consultant. A private consultant is in the business of contracting with local government agencies and has developed two software packages which it plans to market to businesses in California and in other states. As the result of its contracts with local government, it has access to confidential sales and use tax information. One of the software packages would be sold to or licensed to nonretailer taxpayers (primarily manufacturers) for their internal use and does not involve any provision of consulting services provided to local government by the consultant. The other software package is intended to be sold to sales and use tax administrative departments of the various state governments. Using the software, state auditors can download a company's general ledger and use this software as a tool in conducting a compliance audit.

The sale of the products in question to nonretailer manufacturers and to state agencies which administer sales and use tax laws would not be in violation of the provisions of section 7056(b)(1)(C). Furthermore, section 7056(b)(2) would prohibit the consultant from developing a potential client list with respect to the consultant's software products based upon work performed by the consultant in performing its consultant duties with local government authorities. 5/20/96.