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 120.3050

(c) Custom Programs

120.3050 Computer Programs Used to Operate Grading, Sizing, and Marker Making Machines. Grading and sizing involve adjusting the size to scale for different size garments for each of the components of the prototype garment. Marker making is determining the most efficient way for a manufacturer to cut raw cloth to minimize losses to scrap. Persons who create the programs that operate these machines perform their design work using computer software. The finished product is downloaded on diskettes and then transferred to the customers for use in operating their machines.

Persons who create and transfer designs on diskettes which are used to operate grading, sizing, and marker making machines are performing custom computer programming if the designs are prepared to the special order of the customer. Accordingly, the transfer of custom design on diskettes which are used to operate such machines constitutes nontaxable sales of custom computer programs. 6/23/97.