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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
A B C D E F G H I J L M N O P R S T U V W X
L
330.0000 Leases of Tangible Personal Property—In General—Regulation 1660
Annotation 330.3950
(d) "Substantial Change in Form"
330.3950 Computer Hardware and Prewritten Software. Taxpayer loads prewritten software onto a computer and leases them as a single unit in transactions that are true leases. Taxpayer pays sales tax reimbursement or use tax to its vendors when it separately purchases the computer hardware and the prewritten software. Taxpayer does not separately charge for the installation of the leased software onto the leased computer hardware. Taxpayer also provides its customers possession of the originally purchased storage media containing the prewritten software (e.g., the original disks provided by the software vendor) so that the customer may re-install the leased software onto the leased computer hardware if necessary.
Taxpayer has created a unit by merely loading the software onto the computer hardware prior to transferring the property to its customers. Taxpayer does not perform significant fabrication labor to the leased computer. The property is rented in substantially the same form as acquired. That is, the general functional capabilities, characteristics, or form of the property has not been significantly changed following Taxpayer's acquisition. Given these facts, no sales or use tax is due with respect to the amounts charged for such rentals. 10/24/11.