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 120.3190

(c) Custom Programs

120.3190 Diskettes Used to Operate Embroidery Machines. Regulation 1502 provides that tax does not apply to the sale or lease of a custom computer program, other than a basic operational program, regardless of the form in which the program is transferred. Persons who create designs and transfer the design in machine-readable form to operate embroidery machines are performing custom computer programming services if the designs are prepared to the special order of the customer. In other words, the preparation of punched paper tapes and diskettes used to control the operations of embroidery machines for such purposes constitutes nontaxable custom computer programming under section 6010.9. 3/25/97.