Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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R

490.0000 RETURNS, DEFECTS AND REPLACEMENTS—Regulation 1655

Annotation 490.0429

(b) REPLACEMENTS GENERALLY—MAINTENANCE CONTRACTS

490.0429 Bundled Hardware and Software Maintenance Contract (Optional). A contract for optional hardware maintenance is not a contract for the sale of tangible personal property and no sales or use tax applies to the charge. On the other hand, a contract for software maintenance under which the customer will receive updates or error corrections on tangible media is a contract for the sale of tangible personal property. Furthermore, if a software maintenance contract includes a mandatory charge for consultation, that charge is included in the measure of tax from the sale of the software maintenance contract. Therefore, when a bundled contract includes a software maintenance portion and a hardware maintenance portion, the charge for the hardware portion of the contract is nontaxable. The contract should be prorated between the taxable software maintenance portion and the nontaxable hardware maintenance portion of the contract. 7/15/96.