Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 220.0280

220.0280 Training Course—Nexus with California. A out-of-state company is engaged in the sale of prewritten software and software licenses. It maintains no offices or warehouses in California. The company executes its license agreements with its customers out of state. As a result of the license agreement, the company transfers tangible personal property for consideration in the form of computer disks to customers located in California. The customers use the software inside California by installing and running the programs on their computers. These customers owe use tax on the purchase price of the software they purchase.

Independent of the software sales, the company offers a 3½ day software training course which is taught one to three times a year in California. The course attendees do not need to have purchased software licenses from the company, and many have not. The purchase of the software license does not entitle one to attend the course, and, conversely, course attendance does not provide a software license. The software does not in itself require training. The company rents computers for use during the training course and provides the instructor, or facilities are provided by the company's customers who want to offer the training course.

The company's physical presence inside this state through its teaching of software classes is related to the sale of the very software for which the classes are offered. The company's activities inside this state create nexus with California and make it a retailer engaged in business inside this state. The company is engaged in business inside this state and is, therefore, required to collect use tax from its customers. 10/20/97. (M99–1).