SALT Report 1556 – The Utah State Tax Commission recently updated their sales and use tax publication regarding software, computers, and equipment. The publication provides guidance on the taxability of several types of purchases and services.
Sales, rentals, leases and charges for using pre-written software in Utah are considered tangible personal property and are taxable regardless of the delivery method (boxed, hosted, or downloaded)
Charges to modify or adapt pre-written software for a customer are non-taxable if the charges are separately stated on the invoice.
However, if the charges to modify or adapt pre-written software include charges for the initial purchase of the pre-written software, the charges for the pre-written part of the software are taxable.
Custom software is not considered tangible personal property. Therefore, all sales, rentals, leases and charges for custom software written for a certain customer are non-taxable. Further, all charges to maintain, support or upgrade custom software are non-taxable as well.
Remotely Accessed Software
Remotely accessed software, which includes hosted software, application service provider (ASP) software, software-as-a-service (SAAS), and cloud computing applications, is taxable as follows:
- License fees for remotely accessed prewritten software are taxable if the purchased software is used in Utah.
- Remotely accessed software that is used in more than one location must be sourced to each location.
- If the buyer cannot provide the seller with a way to allocate a transaction, the seller must source the transaction to the buyer’s address.