Indiana issues Letter of Findings indicating certain software maintenance agreements are not taxable.

A taxpayer who entered into a software maintenance agreement was not subject to sales tax on the purchase of the agreement. The State of Indiana does not apply sales and use taxes to optional warranties and maintenance agreements that do not supply property on a periodic basis. Even though the language in the agreement indicated that the vendor would provide upgrades to the customer when the upgrades were made available, the State of Indiana stated that there was no guarantee that the upgrade would ever be produced. The state concluded that since this was the case, the taxpayer merely purchased an agreement with a right to have property supplied if the vendor should do so and the property may not be delivered on a periodic basis. (Letter of Findings, No. 02-0086, Indiana Department of Revenue, January 1, 2005)

Posted on January 21, 2005