Illinois Sale of Computer Programming Package

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US-03347BG
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Description

Computer programs are instructions for a computer. Usually, computer programs are in the form of a human-readable, computer programming language called source code. 17 USCS § 101 defines "computer program" as a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result. A software package is used in object-oriented programming to name a group of related classes of a program. Packages are useful to measure and control the inherent coupling of a program. They contain written programs or procedures or rules and associated documentation pertaining to the operation of a computer system and that are stored in read/write memory.

The Illinois Sale of Computer Programming Package refers to the regulations and guidelines set by the state of Illinois regarding the sale and distribution of computer programming packages within its jurisdiction. This comprehensive framework ensures compliance with Illinois laws and protects both consumers and businesses engaged in the computer programming industry. The term "Sale of Computer Programming Package" encompasses a broad range of activities, including the sale, lease, or licensing of computer software, application packages, programming codes, algorithms, and similar digital products. It applies to both physical copies, such as CDs or DVDs, as well as digital downloads or cloud-based services. Illinois recognizes different types of computer programming packages, each with its own unique characteristics and regulations. These include: 1. Commercial Software Packages: These are programming packages developed by businesses or software companies for sale or licensing to end-users. Commercial software packages often come with user licenses, terms of use, and specific restrictions on redistribution, modification, or reverse engineering. 2. Open Source Software Packages: Open source software refers to programming packages released under licenses that grant users the freedom to distribute, modify, and use the software freely. However, certain open source licenses may have specific conditions or restrictions that developers and users must adhere to. 3. Custom Software Packages: Custom software packages are tailored to meet specific needs of businesses or organizations. They are developed by software development firms or independent programmers according to the client's requirements. These packages may be sold, licensed, or developed as works-for-hire. 4. Software as a Service (SaaS): SaaS packages provide access to software applications through a subscription model or on a pay-per-use basis. Customers access the software remotely through the internet, without the need for installation or local storage. SaaS packages often include additional services like maintenance, updates, and customer support. Illinois imposes certain legal obligations on vendors and developers engaged in the sale of computer programming packages. These obligations include compliance with consumer protection laws, ensuring the accuracy of product information, disclosing limitations or known bugs, and honoring warranties or refund policies. It is essential for individuals and businesses involved in the sale of computer programming packages in Illinois to familiarize themselves with the specific regulations and guidelines set by the state authorities. By adhering to these guidelines, vendors can ensure legal compliance while providing high-quality products and services to their customers.

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FAQ

The lease or rental of computer software in the City of Chicago is subject to the lease tax. The sale of computer software is not subject to the lease tax.

Illinois sales and use tax generally doesn't apply to charges for subscription services because subscription receipts aren't derived from a transfer of ownership of tangible personal property to a purchaser.

In the state of Illinois, any modified software which is held for general or repeated sale or lease is considered to be taxable. Sales of digital products are exempt from the sales tax in Illinois.

The sale at retail, or transfer, of canned software intended for general or repeated use is taxable, including the transfer by a retailer of software which is subject to manufacturer licenses restricting the use or reproduction of the software.

Generally, sales of canned computer software are taxable retail sales in Illinois. Canned computer software is considered to be tangible personal property regardless of the form in which it is transferred or transmitted, including tape, disc, card, electronic means, or other media.

Despite the Illinois Department of Revenue's historically complex stance on the taxation of computer software, the Department has now stated that SaaS is not subject to sales tax in Illinois. In other words, cloud-based software is not subject to tax in Illinois.

Any custom software that is delivered through electronic means or via the load and leave method is not considered tangible personal property nor subject to sales tax. However, it is only tax-exempt if separately stated on the invoice from charges for manuals, disks, CDs or other tangible property, which is taxable.

Requirements for prewritten software are still subject to sales and use tax regardless of the method of delivery (whether with a physical medium, downloadable or accessed via the Internet) or if possession or control is given.

A131964 Appellate Court reversed lower court decision and holds that the right to replicate and install software is a property right, which is an intangible.

The majority of states which have addressed the issue and have concluded that software (at least unbundled software) is not tangible personal property for ad valorem tax purposes and therefore is generally not taxable.

More info

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Illinois Sale of Computer Programming Package