Missouri –Taxability of Mandatory Software Maintenance and License Agreements

SALT Report 1438 – The Missouri Department of Revenue ruled that the amount paid for annual software maintenance and license agreements for canned computer software is subject to Missouri sales tax.   In many cases, canned software programs typically require the taxpayer to purchase maintenance and/or license agreements as a condition of the taxpayer’s continued ability to use the software.

Missouri Code of State Regulations 12 CSR 10-109.050(3)(B) states that , “tax applies to the entire amount charged to the customer for canned programs.  Where the consideration consists of license fees or royalty payments, all license fees or royalty payments, present or future, whether for a period of minimum use or for extended periods, are includable in the measure of the tax.”  Additionally, paragraph (3)(E)(1) states that, “program installation, training, and maintenance of software services are taxable when the purchase of the services is mandatory under the terms of an agreement to purchase software.”
Therefore, all mandatory purchases of software maintenance and/or licensing agreements are subject to Missouri sales tax.
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