SALT Report 1453 – Recently enacted legislation in Utah amends previous sales and use tax provisions regarding computer software maintenance contracts, repairs, renovations and products transferred electronically. The also bill updates prior definitions, addresses the taxability of detaching tangible personal property from other tangible personal property, and optional computer software maintenance contracts.
Software Maintenance Contracts
The purchase of an optional computer software maintenance contract that consists of taxable and nontaxable products that are not separately itemized on an invoice is considered a bundled transaction that is 40% taxable and 60% nontaxable.
An “optional computer software maintenance contract” is a computer software maintenance contract that a customer is not obligated to purchase as a condition of the sale of the computer software.
A computer software maintenance contract is a contract that obligates a seller of computer software to provide a customer with:
- Future updates or upgrades to computer software,
- Support services with respect to computer software, or
- A combination of both
Repairs and Renovations
Repairs or renovations of tangible personal property will now include the detachment of property or products transferred electronically from another property if:
- The property that the tangible personal property or products transferred electronically are detached is not permanently attached to real property; and
- Detachment of tangible personal property or products transferred electronically from other property is made in conjunction with a repair, replacement, or a product transferred electronically.
However, repairs or renovations of tangible personal property do not include detaching prewritten computer software from other property if the other property is not permanently attached to real property.
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