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The sale of licenses to financial institutions for the use of online banking and bill payment, a finance and budget tool, and mobile banking products in Software as a Service (SaaS) transactions was subject to Utah sales tax when the financial institution customers were located in Utah. License fees are taxable if they are charged for retail sales of tangible personal property used in Utah, the use of tangible personal property in Utah, or leases or rentals of tangible personal property located in Utah. Sales of rights to use software are taxable retail sales of property. The company sold access to its online products to its customers and trained customers’ employees how to use them. The company’s customers then made the online products available to their banking customers. The essence of the transaction was the sale of the use of the company’s prewritten computer software and not the sale of the services of the company’s personnel. In Utah, if a purchaser uses computer software and a copy of the software is not transferred to the purchaser, the location of the transaction is the purchaser’s address. The taxable use of the company’s online software products was distinguishable from the exempt use of a seller’s online database accessed through the seller’s software. The company does not compile then sell access to any database. (Private Letter Ruling, Opinion No. 15-005, Utah State Tax Commission, November 16, 2015, released January 2016)

(01/18/2016)

On December 18, 2015, President Barack Obama signed H.R. 2029 – Consolidated Appropriations Act, 2016. The Act extends the Internet Tax Freedom Act (ITFA) through October 1, 2016. Prior provisions that grandfather taxes that existed prior to October 1, 1998 are also extended through October 1, 2016. For our previous news item on this topic, see Internet Tax Freedom Act Extended Until December 11, 2015. (H.R. 2029 – Consolidated Appropriations Act, 2016)

(01/18/2016)

On September 30, 2015 the U.S. House of Representative passed H.R. 719, which includes a provision that would extend the Internet Tax Freedom Act (ITFA) through December 11, 2015. The ITFA was scheduled to expire on October 1, 2015. The bill will now go to President Obama for signature.

 

To see our previous news item on the ITFA, visit Internet Tax Freedom Act Extended Until October 1, 2015, Permanent Extension Introduced.

 

To see an update on this news item, visit Internet Tax Freedom Act Extended Through October 1, 2016,

 

(H.R. 719)

(10/26/2015)

Software interfaces purchased by a medical testing company are exempt from Utah sales and use tax because they qualify as custom computer software. In Utah, prewritten computer software is taxable and custom computer software is exempt as a sale of personal services. Prewritten software is not developed to a purchaser’s specifications. The software interfaces purchased by the company gave the company the ability to share information and communicate between its system and customers’ systems. The company used different systems than its customers, so different interfaces were developed to accommodate the individual programming language of each customer’s system. As a result, the software interfaces qualify as custom software and are therefore exempt from Utah sales and use tax. (Private Letter Ruling, Opinion No. 15-004, Utah State Tax Commission, September 28, 2015)

(10/26/2015)

On June 15, 2015, Representative Jason Chaffetz (R-UT) introduced the Remote Transactions Parity Act (RTPA) of 2015 in the U.S. House of Representatives. The bill – similar to the Marketplace Fairness Act (MFA) of 2015 – pertains to sales and use taxcollection obligations for remote sellers, but the RTPA contains some differences and several additional provisions. Unlike the MFA’s $1 million small seller exception, the RTPA’s small seller exception is as follows: first year: $10 million; second year: $5 million; third year: $1 million. The exception goes away in the fourth year. Furthermore, under the RTPA sellers utilizing an electronic marketplace are not considered small sellers and are not entitled to the exception, no matter the year. Under the RTPA, sellers would not be audited by states where they don’t have a physical presence. There would be a three year statute of limitations for assessments on remote sellers. The bill would enable remote sellers to refund over-collected tax to customers. The RTPA also specifies that a state would not be authorized to impose a sales and use tax collection requirement on remote sellers until it has certified multiple software providers that are certified in all states seeking to impose authorization requirements. The RTPA would also allow customers to pursue refunds of over-collected tax from remote sellers. However, RTPA does not preempt states from imposing sales and use taxes on remote sellers that do not have physical presence under this definition. It merely authorizes states to impose sales and use tax on remote sellers without a physical presence. Under the RTPA, if a seller has nexus under existing law, including Quill v. North Dakota, then the state may still impose a sales and use tax collection requirement.  The bill is assigned to the Judiciary Committee just like the MFA.  On July 1, 2015 it was referred to the Subcommittee on Regulatory Reform, Commercial And Antitrust Law. (H.R. 2775, the Remote Transactions Parity Act of 2015)

 

UPDATE: This bill failed to pass during the 114th Congressional Session running from January 3, 2015 to January 3, 2017.  Therefore, this bill has died and would need to be reintroduced to be considered and voted on.

(09/08/2015)

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