Vermont – Taxability of Prewritten Software Accessed Remotely

SALT Report 2589 – The Vermont Department of Taxation issued a fact sheet to remind taxpayers that the moratorium on the collection of sales tax for prewritten software accessed remotely has not been extended and will expire on June 30, 2013. Therefore, prewritten software accessed remotely if purchased before July 1, 2013, is not taxable. However, after that date tax these purchases will be taxable.

The Department’s fact sheet also provides that:

  • Tangible personal property now includes “prewritten software” and is taxable whether it is bought or leased on a disk, as a download, or accessed through a remote server. However, transactions that involve custom software, a personal service, or a professional service are not taxable.
  • If the vendor makes the same or similar product available on a disk or for download, it remains software subject to sales tax if it is offered for remote access with essentially the same functionality.
  • For products that are only available by remote access, additional factors will be considered when determining if they qualify as prewritten software subject to sales tax.

Additionally, the Department has withdrawn Technical Bulletin TB-54 which provides guidance regarding the application of sales tax to computer software and services. As a result, they are in the process of creating a new Technical Bulletin that will address the taxability of these transactions. In the meantime, the Department’s fact sheet should be referred to when trying to determine whether sales and use tax applies to a specific transaction or to the software you are purchasing.

For Further Information

Vermont Department of Taxes – Notice

Fact Sheet – The Sales and Use Tax Treatment of Cloud Computing