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Utah Expands Computer Software Taxability


UPDATE: HB 36 was signed into law on 3/22/2012 and is effective July 1, 2012.

Utah recently passed HB 36, a bill that expands the taxability of computer software

The Utah bill broadens sales and use tax law related to computer software included in "bundled" transactions and computer software added or removed from tangible personal property.

A bundled transaction refers to the sale of a group of items for a single price. HB 36 states that if an "optional computer software maintenance contract" consists of a bundled transaction, including taxable and nontaxable products not separately itemized on an invoice, then 40% of the transaction is taxable and 60% is nontaxable.

The bill also expands the definition of "repairs or renovations of tangible personal property" to include a product "transferred electronically" to or from tangible personal property, if the following conditions are met: 1) the tangible personal property to/from which the product is transferred is not permanently attached to real property; and 2) the transfer is made "in conjunction with a repair or replacement of tangible personal property or a product transferred electronically."

However, this does not include "detaching prewritten computer software from other tangible personal property if the other tangible personal property . . . is not permanently attached to real property."

Utah also recently issued a letter ruling regarding sales tax and web based services.

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Avalara Author
Will Frei
Avalara Author Will Frei
Will Frei covers sales tax news including best practices, legislation and sales tax technology. He is the Social Media Manager at Avalara.