Sales Tax
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Sales Tax on Software to California Buyers
The following information was extracted from regulation 1502 of the California State Board of Equalization. We interpret this to apply to our sale and transfer of software over the internet and world wide web to our customers. This is not a legal opinion. You should employ your own legal counsel for a legal opinion on this subject and how it applies to you. We have extracted only the information that we feel is directly applicable to our transactions which are all conducted by remote telecommunications from our place of business to your place of business in California. You are encourage to obtain a copy of the full document for your review from the California State Board of Equalization. The document is available in PDF format on their website at this URL:
http://www.boe.ca.gov/regs/pdf/reg1502.pdf
If you are unable to access or read the regulation on line, you may obtain a copy of the regulation by contacting the California State Board of Equalization.
State of California
BOARD OF EQUALIZATION
SALES AND USE TAX REGULATIONS
Regulation 1502. COMPUTERS, PROGRAMS, AND DATA PROCESSING.
Reference: Sections 995.2, 6006, 6007, 6010, 6010.9, 6011, 6012, 6015, and 6016, Revenue and Taxation Code.
(b) DEFINITIONS OF TERMS.
Prewritten Program - A program held or existing for general or repeated sale or lease. The term also includes a program developed for in-house use which is subsequently offered for sale or lease as a product.
(f) COMPUTER PROGRAMS.
(D) The sale or lease of a prewritten program is not a taxable transaction if the program is transferred by remote telecommunications from the seller's place of business, to or through the purchaser's computer and the purchaser does not obtain possession of any tangible personal property, such as storage media, in the transaction. Likewise, the sale of a prewritten program is not a taxable transaction if the program is installed by the seller on the customer's computer except when the seller transfers title to or possession of storage media or the installation of the program is a part of the sale of the computer.
If the transfer of a prewritten program is a nontaxable transaction, then the seller is the consumer of tangible personal property used to produce written documentation or manuals (including documentation or manuals in machine-readable form) designed to facilitate the use of the program and transferred to the purchaser for no additional charge. If a separate charge is made for the documentation or manuals, then tax applies to the separate charge.
The following is excerpted from California Board of Equalization
Publication 109, Are your Internet Sales Taxable?
Available online in Adobe Postscript at:
http://www.boe.ca.gov/sutax/pdf/pub109.pdf
Some Internet Sales are not taxable
Products electronically transmitted to customers
Your sale of electronic data products such as software, data, and digital images is generally not taxable when you transmit the data to your customer over the Internet or by modem. However, if as part of the sale you provide your customer with a printed copy of the electronically trans-ferred information or a backup data copy on a physical storage medium such as a CD-ROM or diskette, your entire sale is usually taxable.
For example, if your company sells canned (non-custom) software programs to customers who download them from a server, those sales are generally not subject to tax. However, if you also provide your customers with a backup copy on a CD-ROM, the entire transaction is taxable. Similarly, if you transmit a stock (non-custom) database to your customer over the Internet and also provide a printed copy of the contents, the entire sale is subject to tax.
Sales Tax on Software to Buyers outside of California
In general, sales from a California retailer to a buyer outside the state of California are not subject to California sales tax as indicated in:
Regulation 1620 - Interstate and Foreign Commerce (PDF format)
You may be subject to taxes such as "use tax" or "value added tax" or "property tax" in your location and/or jurisdiction. It is your responsibility to determine such liability and to comply with them. This is not a legal opinion. You should employ your own legal counsel for a legal opinion on this subject and how it applies to you.
Responsibility for Taxes
Our license agreement states that you are responsible for any and all tax liability in respect to your purchase of a license to use our software. This is in paragraph 19 and can be read in the copy you received with your download of our software or at this URL:
http://www.elsop.com/linkscan/license.html