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 120.0520

(a) In General

120.0520 Sales of Programs to Value Added Reseller. A computer software company transfers its programs to a Value Added Reseller (VAR). The VAR generally uses the company's programs to develop, market, and sublicense application programs which include, as a component part, the company's programs or a function of the company's program. Since the VAR does not sell the actual software received from the company nor does it physically incorporate the software into tangible personal property sold by the VAR, the transfer by the company is not a sale for resale. However, a license fee paid specifically for the right to reproduce or copy a program to which a federal copyright attaches is not taxable. (See Regulation 1502(f)(1)(B).) 7/20/93.