Ga. Comp. R. & Regs. R. 560-12-2-.111 - Computer Software and Computer - Related Services
(1)
Purpose. This Rule sets
forth the application of Georgia sales and use tax concerning the sale or use
of computer software and computer-related services.
(2)
Definitions. For the
purposes of this Rule, the following definitions and explanations of terms
shall apply:
(a) "Application program" means
a set of statements or instructions that when incorporated in a machine-usable
medium is capable of causing a machine or device having information processing
capabilities to indicate, perform, or achieve a particular function, task, or
result for the end user. Application programs include any other computer
software that does not qualify under subparagraph (2)(h) or (2)(n).
(b) "Computer" means the components and
accessories that constitute the physical computer assembly that accepts
information in digital or similar form and manipulates it for a result based on
a sequence of instructions. A computer includes but is not limited to these
components and accessories: a central processing unit, keyboard, console,
monitor, memory unit, disk drive, tape drive or reader, terminal, printer,
plotter, modem, document sorter, and optical reader.
(c) "Computer-related services" means
services including, but not limited to, computer programming, installation,
time-sharing, consulting, training, data processing, system testing, and
information retrieval.
(d)
"Computer software"means any computer data, program or routine, or any set of
one or more programs or routines, which are used or intended for use to cause
one or more computers, pieces of computer-related peripheral equipment,
automatic processing equipment, or any combination thereof, to perform a task
or set of tasks. Without limiting the generality of the foregoing, the term
"computer software" shall include operating programs, application programs,
system programs, and any other subdivisions (such as assemblers, compilers,
generators, and utility programs).
(e) "Custom computer software" means computer
software, including custom updates, which is designed and developed by the
author to the specifications of a specific purchaser. Any subsequent sale of
custom software to a different purchaser, customer, person, or entity shall be
deemed the sale of prewritten computer software.
(f) "Delivered electronically" means
delivered to the purchaser by means other than tangible storage
media.
(g) "Load and leave" means
delivery to the purchaser by use of tangible storage media where such tangible
storage media is not physically transferred to the purchaser.
(h) "Operating program" means a set of
statements or instructions that when incorporated into a machine or device
having information processing capabilities is an interface between the computer
hardware and the application program or system program.
(i) "Prewritten computer software," also
known as "canned computer software," means computer software that is designed,
prepared, or held for general distribution or repeated use, or software
programs developed in-house and subsequently held or offered for repeated sale,
lease, license, or use.
(j)
"Software license agreement" means the transfer of possession and the right to
use computer software for the purpose of reproduction or other use in a
computer.
(k) "Software maintenance
agreement" means providing error corrections, fixes, improvements, technical
support upgrades and updates to purchased or licensed computer software under a
single agreement.
(l) "Streamlined
Sales Tax Project" ("SSTP") is an effort created by state governments, with
input from local governments and the private sector, to simplify and modernize
sales and use tax collection and administration. The SSTP's proposals include
tax law simplifications, more efficient administrative procedures, and emerging
technologies to substantially reduce the burden of tax collection. The SSTP
will develop measures to design, test and implement a sales and use tax system
that simplifies sales and use taxes.
(m) "Streamlined Sales and Use Tax Agreement"
describes the agreement developed by the Streamlined Sales Tax Project, which
provides for uniform definitions, terms of art, collection and registration
responsibilities, governing board procedures, and other articles of importance
related to sales and use tax. These items will provide for simplification and
uniformity when adopted by the implementing states.
(n) "System program" means a set of
statements or instructions that interacts with the operating program that is
developed, licensed, and intended to build, test, manage, or maintain
application programs.
(3)
Computer software sold in a
tangible medium.
(a) Prewritten
computer software. The sale, lease, rental, license, or use of prewritten
computer software is subject to sales and use tax when sold in a tangible
medium. Prewritten computer software, even though modified or enhanced to the
specifications of a purchaser, remains prewritten computer software.
1. The combining of two or more prewritten
computer software programs or prewritten portions thereof does not cause the
combination to be anything other than prewritten computer software.
2. Prewritten computer software includes
computer software designed and developed by the author or other creator to the
specifications of a specific purchaser when it is sold in a tangible medium to
a person other than the specific purchaser.
(b) Custom computer software. The sale,
lease, rental, license, or use of custom computer software is a professional
service transaction not subject to sales and use tax.
1. A purchaser may receive custom software by
means of a tangible medium without changing the taxability of the purchase. The
transfer to the purchaser in a tangible medium is deemed to be merely an
incidental part of the sale of a nontaxable professional service.
2. Sales of multiple copies or license
agreements of custom software to the original purchaser are not subject to
sales and use tax. Custom software becomes prewritten computer software when it
is sold to someone other than the person for whom it was designed and
developed.
3. Charges for custom
computer software that are not separately stated on the dealer's invoice from
the sale, lease, or rental of hardware, machinery, or equipment are considered
subject to the tax as part of the hardware, machinery, or equipment
sale.
(c) Modified
prewritten computer software.
1. Prewritten
computer software or a prewritten portion thereof that is modified or enhanced
to any degree, where such modification or enhancement is designed and developed
to the specifications of a specific purchaser, remains prewritten computer
software.
2. If there is a
separately stated charge on the dealer's invoice for the modification or
enhancement of prewritten computer software, the charge for modification or
enhancement is not subject to sales and use tax.
(4)
Computer software sold
in an intangible form.
(a) Computer
software delivered electronically is not a sale of tangible personal property
and therefore is not subject to sales or use tax. The dealer's invoice,
purchase contract, or other documentation must indicate the method of delivery.
If the method of delivery is not indicated on the dealer's invoice, purchase
contract, or other documentation, delivery will be presumed to have been made
through a tangible medium, and the burden will be upon the taxpayer to
establish to the satisfaction of the Department that the computer software was
delivered electronically.
(b) If a
dealer delivers computer software electronically and also provides the same
computer software to the purchaser in a tangible medium, the transaction shall
be treated as the taxable sale of tangible personal property unless the
software qualifies as custom software.
(5)
Computer software installation and
maintenance agreements.
(a) Computer
software installation services. Charges for computer software installation
services are not subject to sales and use tax when such charges are separately
stated on the dealer's invoice.
(b)
Software maintenance agreements - charges bundled. Software maintenance
agreements that are bundled, as opposed to separately stated, on the dealer's
invoice for prewritten software provided in a tangible medium are subject to
sales and use tax.
(c) Software
maintenance agreements - charges separately stated. Separately stated charges
for software maintenance agreements, when such agreements include prewritten
software updates, upgrades, or enhancements delivered in a tangible medium and
include support services, are deemed to be taxable at 50 percent of the
software maintenance agreement's total stated sales price. The dealer may elect
to use an alternate percentage if the percentage can be established to the
satisfaction of the Department that the alternate percentage is based upon
reasonable accounting methods. For example, the alternate percentage may be
derived using the cost or estimated retail sales price of the software update,
upgrade or enhancement. If it is determined that the alternate percentage used
by the dealer is not based on reasonable accounting methods, the Department
shall require the dealer to remit additional sales and use tax based upon 50
percent of the stated sales price of the software maintenance
agreement.
(d) Software maintenance
agreements - updates, upgrades, or enhancements only. Separately stated charges
for software maintenance agreements that include only prewritten software
updates, upgrades, or enhancements delivered in a tangible medium, and no
support services, are subject to sales and use tax on the total sales
price.
(e) Software maintenance
agreements - support services only. Separately stated charges for software
maintenance agreements that include only support services, and no prewritten
software updates, upgrades, or enhancements delivered in a tangible medium, are
not subject to sales and use tax.
(f) Software maintenance agreements - custom
software. Separately stated charges for custom software maintenance agreements,
including software updates, upgrades, or enhancements delivered in a tangible
medium, are not subject to sales and use tax.
(g) Taxed software maintenance agreements -
Deductions. If a dealer has previously taxed the sale of a software maintenance
agreement, and software updates, upgrades, or enhancements are not provided in
a tangible medium or are not provided at all, then the dealer may claim a
deduction on their sales and use tax return for the taxable amount of the
software maintenance agreement. In order to claim the deduction, the dealer
must be able to show that sales tax was previously collected and remitted to
the Department and that a corresponding credit for all sales tax paid on the
software maintenance agreement has been issued to the purchaser.
(h) Streamlined Sales and Use Tax Agreement.
In the event that the Streamlined Sales and Use Tax Agreement adopts a
different taxable percentage or amount with respect to software maintenance
agreements, the percentage as stated in subparagraph (5)(c), as well as the
ability to establish a different percentage to the satisfaction of the
Department, shall be replaced with the taxable percentage or amount provided in
the Streamlined Sales and Use Tax Agreement. If the Streamlined Sales and Use
Tax Agreement is silent with respect to the taxability of software maintenance
agreements, the provisions of subparagraph (5)(c) shall apply.
(6)
Miscellaneous.
(a) Load and leave. Prewritten or modified
computer software transferred to the retail purchaser by means of load and
leave is not subject to sales and use tax. The transaction is not deemed to be
the sale of tangible personal property when the retailer installs the computer
software and the computer software does not remain permanently in the
purchaser's possession in a tangible medium after the computer software has
been installed.
(b)
Computer-related services. The sale of a computer-related service is not
subject to sales and use tax when the charge is separately stated on the
dealer's invoice. If the charge for a computer-related service is bundled
together with a taxable retail sale, lease, rental, license or use of
prewritten computer software, then the entire charge is subject to
tax.
(c) Software license
agreement. The licensing of prewritten or modified computer software or the
renewal/extension of such licensing agreement(s) is subject to sales and use
tax as a lease or rental of tangible personal property when the original
prewritten or modified computer software was delivered in a tangible
medium.
(d) Prewritten computer
software sold, leased, rented or licensed and delivered in a tangible medium,
is exempt from Georgia sales and use tax when the transaction qualifies for
exemption under O.C.G.A. ยงยง
48-8-3(34), 48-8-3(34.1),
48-8-3(34.2), 48-8-3(36), 48-8-3(36.1), 48-8-3(58), or 48-8-3(68).
Notes
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