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Touche Ross and Co. v. State Board of Equalization … (1988)

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Existing Library of Custom Computer Programs Is Taxable when Sold

Plaintiff, the liquidation agent for taxpayer, sold all the assets of taxpayer's engineering services division to a purchaser. Part of the assets consisted of a library of custom computer programs. Taxpayer also made numerous sales of the assets of its other divisions to other purchasers. Plaintiff contended that the sale of the software library was a nontaxable sale of custom programs, and that the sale of the engineering services division's assets was an exempt occasional sale.

The court of appeal held in favor of the Board, stating that since the computer programs were not developed to the special order of the purchaser, their sale could not be characterized as a service excluded from tax under Revenue and Taxation Code Section 6010.9. The court also held that all of the taxpayer's sales, not just sales by one division, must be considered in determining whether the sale of that division's assets was an exempt occasional sale, and therefore the sale of the engineering services division was taxable. Touche Ross and Co. v. State Board of Equalization (1988) 203 Cal.App.3d 1057.