Virginia’s Commissioner has ruled that separate charges under one contract when related to the modification of prewritten software programs are exempt.

Under audit a vendor was held responsible for charges that are normally exempt when related to software modification despite the fact that two separate contracts had been signed. The Commissioner acknowledged that two contracts, one for prewritten software and another for modification of the prewritten software, can act legally as one transaction. However, the fact that the vendor made separate charges for the modification of the software demonstrated that the service was directly related to providing modification services. (Ruling of Commissioner, P.D. 03-61, August 19, 2003.)

Posted on December 15, 2003