Laws, Regulations and Annotations
Business Taxes Law Guide – Revision 2023
Sales and Use Tax Annotations
120.0000 Automatic Data Processing Services and Equipment—Regulation 1502
(a) In General
120.0052 Computer Software—License to Use and Sell. A corporation enters into a contract for the sale of software which provides for a $300,000.00 payment plus a license fee for the right to incorporate the software into custom software to be developed and sold by the purchaser. The contract also allows the purchaser to use the program for "purposes of processing customer data and for marketing."
The amount of the license fees attributable to the "right to incorporate" and resell the software, is excludable from the measure of tax pursuant to Regulation 1502 (f)(1)(B). The portion of the $300,000 fee which is attributable to the customer's right to use the software is subject to tax, unless the software sold by the corporation is a "custom computer program." 6/12/91.