Tax Commission, Auditing

Section R865-19S-92

Computer Software and Other Related Transactions Pursuant to Utah Code Ann. Section 59-12-103

Notice of Proposed Rule

(Amendment)

DAR File No.: 34756
Filed: 05/02/2011 09:14:38 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Section 59-12-211 requires the commission to promulgate rules for the sourcing of a transaction that involves computer software if there is no transfer of a copy of the software to the purchaser and the purchaser uses the software at more than one location.

Summary of the rule or change:

The proposed amendment indicates how a transaction involving computer software is sourced if the transaction does not include a copy of the software to the purchaser and the purchaser uses the software at more than one location.

State statutory or constitutional authorization for this rule:

• Section 59-12-211
• Section 59-12-103

Anticipated cost or savings to:

the state budget:

None--Any fiscal impact was considered in H.B. 35 (2011 General Session). (DAR NOTE: H.B. 35 will be effective as of 07/01/2011.)

local governments:

None--Any fiscal impact was considered in H.B. 35 (2011).

small businesses:

None--Any fiscal impact was considered in H.B. 35 (2011).

persons other than small businesses, businesses, or local governmental entities:

None--Any fiscal impact was considered in H.B. 35 (2011).

Compliance costs for affected persons:

None--The proposed amendment provides a manner for a seller to source these software related transactions if the seller is required to collect and remit sales tax, or for the purchaser to source these software related transactions if the seller is not required to collect and remit sales tax.

Comments by the department head on the fiscal impact the rule may have on businesses:

Adoption to this rule creates no additional impact beyond that considered when H.B. 35 was passed. (DAR NOTE: H.B. 35 will be effective 07/01/2011.)

Michael Cragun, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Tax Commission
Auditing
210 N 1950 W
SALT LAKE CITY, UT 84134

Direct questions regarding this rule to:

• Christa Johnson at the above address, by phone at 801-297-3901, by FAX at 801-297-3907, or by Internet E-mail at cj@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

06/14/2011

This rule may become effective on:

06/21/2011

Authorized by:

Michael Cragun, Tax Commissioner

R865. Tax Commission, Auditing.

R865-19S. Sales and Use Tax.

R865-19S-92. Computer Software and Other Related Transactions Pursuant to Utah Code Ann. [Section]Sections 59-12-103 and 59-12-211.

(1) "Computer-generated output" means the microfiche, microfilm, paper, discs, tapes, molds, or other tangible personal property generated by a computer.

(2) The sale, rental or lease of custom computer software constitutes a sale of personal services and is exempt from the sales or use tax, regardless of the form in which the software is purchased or transferred. Charges for services such as software maintenance, consultation in connection with a sale or lease, enhancements, or upgrading of custom software are not taxable.

(3) The sale of computer generated output is subject to the sales or use tax if the primary object of the sale is the output and not the services rendered in producing the output.

(4)(a) The provisions for determining the location of a transaction under Subsection (4)(b) apply if:

(i) a purchaser uses computer software;

(ii) there is not a transfer of a copy of the computer software to the purchaser; and

(iii) the purchaser uses the computer software at more than one location.

(b) The location of a transaction described in Subsection (4)(a) is:

(i) if the seller is required to collect and remit tax to the commission for the purchase, and the purchaser provides the seller at the time of purchase a reasonable and consistent method for allocating the purchase to multiple locations, the location determined by applying that reasonable and consistent method of allocation; or

(ii) if the seller is required to collect and remit tax to the commission for the purchase , and the seller does not receive information described in Subsection (4)(b)(i) from the purchaser at the time of the purchase, the location determined in accordance with Subsections 59-12-211(4) and (5); or

(iii) if the purchaser accrues and remits sales tax to the commission for the purchase, the location determined:

(A) by applying a reasonable and consistent method of allocation; or

(B) in accordance with Subsections 59-12-211(4) and (5).

 

KEY: charities, tax exemptions, religious activities, sales tax

Date of Enactment or Last Substantive Amendment: [January 27, ]2011

Notice of Continuation: March 13, 2007

Authorizing, and Implemented or Interpreted Law: 59-12-103; 59-12-211