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
120.0532 Software Installation Charge. A retailer transfers software to customers on tangible media pursuant to a basic software license agreement. The software is for the customer's own use. The license fee includes all charges for installation of this software, installation support services (includes training classes for customer's employees), and warranty. Out-of-pocket expense costs and expenses incurred by the retailer when providing pre-installation support services and installation support services or warranty work are separately billed to purchaser and include transportation expenses, motel accommodations, meals, telephone charges, and mailing expenses.
A charge for testing a prewritten program on the purchaser's computer to ensure that the program operates as required is the only charge regarded as an installation charge. (Regulation 1502(f)(1)(E).) Although there is no requirement to separately state such charges, the Board strongly recommends that it be separately stated. All the other services listed which the customer is required to purchase in order to purchase the software are services part of the sale, the charge for which is subject to tax regardless of whether they are separately stated. The separate charges for out-of-pocket expenses are subject to tax except for those related to nontaxable installation. The charges should be prorated based on the charges to respective services to which they relate. 4/26/91.