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 120.3045

(c) Custom Programs

120.3045 Computer Programming Activities. A company engaged in developing and selling computer programs entered into an agreement with a number of local government entities to perform certain computer programming activities related to the maintenance of a computerized data system. The computer program was originally developed by one entity and was eventually adopted for use by 14 entities. The issue is whether the company sold or fabricated custom computer programs for a single entity or whether the company prepared prewritten computer programs for repeated sales to various entities.

The entities involved joined together to execute a single contract with the company. All instructions were issued by a Joint Committee representing all of the entities and which acted as the executive body for the group. The evidence supports a finding that the entities formed a joint venture for the purpose of contracting with the company for computer programs. The company was, therefore, providing computer programs to the special order of a customer, the joint venture, and did not prepare computer programs for repeated sales or lease to the individual entities. Under section 6010.9, the company's programs were custom programs the sales or leases of which are not subject to tax. It is immaterial that payment to the company was made by individual members of the joint venture. The payments were allocated and made in accordance with the contract which set up the joint venture. 7/6/83.