SALT Report 1204 – Due to the difficulty in establishing what portion of a technology transfer agreement’s (TTA’s) lump-sum sales price for non-custom software, patent, or copyright interests is subject to California sales tax, the California State Board of Equalization has approved a study to determine the feasibility of adopting an optional percentage that can be applied to a TTA’s sales price to estimate the fair market value of the tangible personal property transferred under the TTA.
If the study indicates that a method of reporting tax based on a percentage of a TTA’s lump-sum sales price is feasible, BOE staff will propose that the percentage be incorporated into Reg. 1507, Technology Transfer Agreements. The proposal would seek to develop and adopt a percentage that can be used to estimate 200% of the cost of the labor and materials used to produce tangible personal property transferred under a TTA involving non-custom software.
The BOE is looking for study participants that meet the following criteria:
- Hold patent and/or copyright interests in software sold;
- Make retail sales of non-custom software that are transferred on tangible storage media;
- Have knowledge of cost accounting and GAAP for software development costs; and
- Are willing to provide their cost accounting data to BOE staff.
Participants in the study will remain anonymous. In addition, the BOE will maintain the confidentiality of the participants’ records and will only release aggregated data to the public in order to avoid identifying the participants or their proprietary information. The study will be completed before June 2012.
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