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Software Industry Interpretation of License Upgrade Rejected by SST Panel


SSTP

During a Compliance Review and Interpretations Committee (CRIC) of the SST Governing Board teleconference, an interpretation request sought by a representative of the software industry was rejected. The Software Finance and Tax Executive Council (SoFTEC) sought a ruling that a software license upgrade (as opposed to an upgrade of the software itself) does not constitute “tangible personal property” or “computer software” where the only thing delivered to the purchaser is an alphanumeric code. Mark Nebergall, on behalf of SoFTEC, argued that providing enhanced license rights is intangible personal property. He differentiated this from a software upgrade that allows the software to cause the computer onto which it is loaded to perform more or different functions. Members of CRIC, and representatives of other states argued that it was contrary to the position currently taken in many states; it hid the true nature of the transaction, and would facilitate tax reduction strategies. Ultimately, the committee members voted unanimously to reject the proposed SoFTEC interpretation. They found that “computer software” as defined in the Agreement would in fact constitute a software license upgrade as described in proposed interpretation. (Teleconference, Compliance Review and Interpretations Committee)

(07/13/2009)
(Archived)
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