SALT Report 1983 – The Illinois Department of Revenue issued a general information letter regarding the taxability of a college’s sales of phone applications. The College has developed phone applications for use on an iPhone that will allow users to check the weather, find restaurants, track weight, and assist with health issues. These Apps are only available to customers through Apple’s online App store. For every sale made through the online store the College will receive a percentage of the total sales price from Apple.
In their response the Department’s noted that:
- The College’s phone Apps may be considered canned software, and
- Sales of the Apps to Apple would be considered sales for resale
Generally, sales of “canned” computer software are taxable retail sales in Illinois. Canned computer software is considered to be tangible personal property regardless of the form in which it is transferred or transmitted, for example tape, disc, card, electronically, or other media. Additionally, computer software that is not custom software is also considered canned computer software, whether it is “stand-alone” or not.
Further, the Department stated that when a person purchases tangible personal property with the intention of reselling it to purchasers for use or consumption, that person is making retail sales of tangible personal property. Therefore, the initial purchase is a purchase for resale, and the subsequent sale is a taxable sale at retail subject to Illinois Retailers’ Occupation and Use Tax under 86 Ill. Adm. Code 130.201 and 86 Ill. Adm. Code 130.210.
The College was urged to read the Department’s regulation for resale certificates, “Seller’s Responsibility to Obtain Certificates of Resale and Requirements for Certificates of Resale,” in 86 Ill. Adm. Code 130.1405.
The general information letter also discusses how to rebut the presumption that a sale is not for resale and what to do when a buyer fails to provide the seller with an active registration number or resale number.
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