Sales, Use and International Tax Activity Update - March 2010

North Carolina takes the “Personal” out of PC Software Exemption

The North Carolina Department of Revenue provides guidance regarding the application of sales and use taxes to computer software.

Previously enacted legislation provides that effective January 1, 2010, the sale at retail and the use, storage, or consumption of computer software that meets any of the following descriptions is exempt:

1. Software designed to run on an enterprise server operating system;
2. Software sold to a person who operates a datacenter and is used within the datacenter; and
3. Software sold to a person who provides cable service, telecommunications service, or video programming and is used to provide ancillary service, cable service, Internet access service, telecommunications service, or video programming. Prior to January 1, 2010, computer software delivered electronically or delivered by load and leave was exempt.

In addition, and also effective January 1, 2010, computer software or digital property that becomes a component part of other computer software or digital property that is offered for sale or a service that is offered for sale is exempt.

Custom computer software and the portion of prewritten computer software that is modified or enhanced, provided the modification or enhancement is designed and developed to the specifications of a specific purchaser and the charges for the modification or enhancement are separately stated, continue to be exempt.

Prewritten computer software or licenses purchased by consumers for personal use are subject to tax.

The North Carolina Department of Revenue Important Notice can be viewed on the North Carolina Department of revenue Web site.

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