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While software is not physical or tangible in the traditional sense, accounting rules allow businesses to capitalize software as if it were a tangible asset. Software that is purchased by a firm that meets certain criteria can be treated as if it were property, plant, & equipment (PP&E).
Tangible personal property exists physically (i.e., you can touch it) and can be used or consumed. Clothing, vehicles, jewelry, and business equipment are examples of tangible personal property.
C. 64H, § 6(r), because the software will become an ingredient or component part of tangible personal property to be sold. Sales or use of the computer equipment in Massachusetts is taxable.
First, the statute defines computer software as personal property only to the extent of the value of the uninstalled storage medium on or in which it is stored or transmitted. Next, the statute goes on to define all computer software as an intangible.
SaaS is a sale of prewritten or canned software, and subject to the transaction of sales tax as the sale of tangible personal property.
Sales of digital products are exempt from the sales tax in Massachusetts.
Sales of custom software, personal and professional services, and reports of individual information are generally exempt from Massachusetts sales and use taxes.
In addition, sales of prewritten software, computer hardware, and hardware and software maintenance contracts involving software updates, upgrades and fixes are generally subject to the Massachusetts sales and use tax under the rules provided in the regulation.
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.