[Hidden-tech] FW: Additional guidance from the Department ofRevenue on Computer Software Tax

Scott Reed sreed at avacoda.com
Fri Aug 23 19:04:35 EDT 2013


The following is lifted from the DOR's FAQ:

    2.  What are modifications to prewritten software that are taxable
    under the new law?

    A.  Modifications to prewritten software that are subject to tax
    under the new law are modifications to  software which is licensed,
    sold or otherwise made available to more than one user, where such
    prewritten software is modified for the use of a specific customer. 
    The modification may be made either by the original seller/licensor
    of the software or by a third party.

    For purposes of this tax on modification, integration, enhancement,
    installation or configuration of standardized (prewritten) software,
    prewritten software *does not include* proprietary code owned by the
    provider (seller) of the modifications if that proprietary code is
    not separately licensed to customers.

    Custom application software (including custom software that
    incorporates such proprietary code) that is designed to run on a
    prewritten operating system is /treated as custom software and not
    as a modification of the prewritten operating system software/.

I interpret the second sentence to say that there is no tax on original 
code as long as the modifications are not licensed to the customer (i.e. 
as long as the customer is paying for the coder's time and not for a 
license to use the coder's product).

I interpret the third sentence to say that there is no tax on original 
(unlicensed) code that uses prewritten, third party, libraries and runs 
on prewritten OSs.

This lets those that write code off the hook for the most part and it 
helps clarify that the tax *does apply* to development within standalone 
database frameworks like Excel, Access, Drupal, Joomla, etc. where much 
of the development involves modification to an underlying database.

I wonder, however, if they tax bookkeeping services and, if not, how is 
that different from working within these other database frameworks?
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