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Yes. Charges for maintenance agreements (whether optional or mandatory) that are made in conjunction with, or as part of the sale of, computer software sold and delivered by tangible means are includable in "gross proceeds of sales" or "sales price", and, therefore, subject to the tax.
Prescription medicines, groceries, and gasoline are all tax-exempt. Some services in South Carolina are subject to sales tax.
Does California require sales tax on Downloadable Custom Software? California does not require sales tax on downloadable custom software.
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.
In a recent private letter ruling, the South Carolina Department of Revenue held that software subscription services are tangible personal property subject to sales and use taxes.
In addition, licenses for the use of software accessed electronically are not considered sales of tangible personal property, and therefore are not subject to state sales tax, as long as no transfer of tangible personal property occurs as a part of the transaction.
Ideally, all software purchases should be taxable to final users and exempt for business users. Instead, states tax some kinds of software and exempt others, based on whether it is customized or off-the-shelf and whether it is on CD or downloaded, all silly distinctions for tax purposes.
Sales tax is imposed on service fees for software installations. In addition, charges for software maintenance services, including updating prewritten software, are generally taxable. Contracts for maintenance of custom software, on the other hand, are not taxable.
Software sold and delivered to a purchaser electronically is not subject to the sales and use tax.
Luckily, California - the US's biggest state for digital goods - has defined digital goods, software, and SaaS as exempt from sales tax.