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Business Taxes Law Guide—Revision 2024

Sales and Use Tax Annotations


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A


120.0000 Automatic Data Processing Services and Equipment—Regulation 1502

Annotation 120.0840

(a) In General

120.0840 Use of Software at a Central Location. A multistate corporation maintains a master computer center in California. The corporation routinely purchases prewritten software from vendors who ship the disk or tape to the California center. The software is installed into the master computer center. The corporation's locations from throughout the world then log onto the master computer center by remote telecommunication and download the software to their computers. The corporation pays an initial amount for the right to use the program at a stated number of locations. It also agrees to pay an additional fixed price for each additional location.

The programs are installed and used in California regardless of the location of persons who have access to the master computer. Tax applies to the initial amounts, the amounts paid for additional locations, and program updates if the programs purchased are transmitted to the master computer center in tangible form.

Tax does not apply to contracts to transmit updates to the master computer center by remote telecommunication, provided that the updates are, in fact, transmitted by remote telecommunication with no transfer of tangible personal property. However, the application of tax to such contracts would not affect the application of tax to contracts, such as the initial purchase and previous update contracts, which provided for the transfer of tangible personal property such as storage media. 11/21/94.