Sales Tax Articles
Sales Tax State Activity Update - March 2008
Missouri Cans Exemption on Canned Software Updated Over the Internet
A taxpayer's original contract was for the purchase of computer software (presumably canned software) and mandatory software support/maintenance service, both of which were originally provided in a tangible format and taxable.
Under the terms of the contract, the taxpayer renews the mandatory service on a yearly basis to receive continued software support/maintenance service on such software but now receives the service via the Internet. The purchases of these services are still subject to sales tax because the sale of the initial software program was taxable and the software support/maintenance services were mandatory under the terms of the contract.
Facts
The taxpayer is a corporation located in Missouri which entered into a contract to purchase computer software in a tangible format. Also purchased was a mandatory software support/maintenance services under the same contract. In the past, the software support/maintenance was provided in a tangible format (i.e. a disc). Now the software support/maintenance service will be provided over the Internet.
Response
Missouri Code of State Regulations 12 CSR 10-109.050(3) (E) provides that program installation, training, and maintenance of software services are taxable if "the purchase of the service is mandatory under the terms of an agreement to purchase software." (Note: Subsection 3 of this regulation deals with canned software).
The taxpayer's original contract was for the purchase of computer software and mandatory software support/maintenance service, both of which were originally provided in a tangible format. Under the terms of the contract, the taxpayer renews the mandatory service on a yearly basis to receive continued software support/maintenance service on such software. Despite the fact that the software support/maintenance service is now provided over the Internet, the purchases of this service is subject to sales tax because the sale of the software program was taxable and the software support/maintenance service was mandatory under the terms of the contract.
The full text can be viewed on the Missouri Department of Revenue Website.
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