Laws, Regulations and Annotations


Business Taxes Law Guide—Revision 2024

Sales and Use Tax Annotations

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120.0000 Automatic Data Processing Services and Equipment—Regulation 1502

Annotation 120.0107

(a) In General

120.0107 Driver Source Code. Company A is planning to contract the development of a software product from Company B. Company B will purchase an unlimited source code for Company A from the manufacturer, modify the driver source code, and deliver the original and modified source to Company A at project completion.

It appears that Company B merely acts as an agent on behalf of Company A in acquiring the program from the manufacturer. If this is true, the relevant transaction is the transfer of the program from the manufacturer to Company A. Tax does not apply to the amount paid for the license or royalties by Company A to the manufacturer for the transfer of the program to Company A if the transfer is to provide Company A with the right to reproduce and copy a program to which a federal copyright attaches in order for Company A to publish and distribute the program regardless that Company A has Company B modify the program to be compatible with Company A's application. 8/31/92.