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NC Sales Tax Are computer "subscription license" taxable for…

NC Sales TaxAre computer "subscription...
NC Sales TaxAre computer "subscription license" taxable for NC sales tax? Subscriptions such as a monthly backup program.Thanks,
JW
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10/10/2017
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Hello. Thank you for choosing this Q&A service for assistance. My name is Angela. I will be assisting you.

Q: Are computer "subscription license" taxable for NC sales tax? Subscriptions such as a monthly backup program.

A: In brief, yes, but only to the extent that the software is used within New York. SEE BELOW:

-------------------------------------

Since, prewritten computer software is included within the definition of tangible personal property, the Taxpayer’s sale of the license to use its basic software is subject to sales tax to the extent the software is used in New York. If the locations in which the customer will use the software are both in and out of New York, the Taxpayer should collect tax based on the portion of the taxable receipts attributable to the customer's use in New York.

REFERENCE SOURCE:

http://www.salestaxinstitute.com/resources/news/new-york-discusses-taxability-software-licenses-and-services

If you do not require further assistance with this matter, I ask that you please take the time to scroll to the top of the page and select 3 or more stars to positively rate my response so that I can receive credit for assisting you. A 5 star rating is greatly appreciated. Thank you in advance.

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Hello again. My deepest apologies, I could have sworn I saw NY instead of NC when I opened the question. You were the first question that I answered when I got on the computer, so I guess my eyes were not adjusted yet. Thank goodness I cam back to look at this, I would have certainly gotten dinged by my colleagues for sure on this one. Smile

As for NC, based on the following information, the subscription license is exempt from sales tax.

---------------------------------

The North Carolina Department of Revenue has issued a notice discussing enacted legislation concerning the taxability of computer software. Effective January 1 ,2010, the sale at retail and the use, storage, or consumption of computer software that meets the following requirements is exempt from tax: (1) software that is designed to run on an enterprise server operating system; (2) software that is sold to a person who operates a datacenter and is used within the datacenter; (3) software that is sold to a person who provides cable service, telecommunications service, or video programming and is used to provide ancillary service, cable service, Internet access service, telecommunications service, or video programming. Prior to January 1, 2010, computer software delivered electronically or by load and leave was exempt from sales and use tax. Also effective January 1, 2010, computer software or digital property that becomes a component part of other computer software of digital property that is offered for sale or of a service that is offered for sale is exempt. Custom computer software and the portion of prewritten computer software that is modified or enhanced if the modification or enhancement is designed and developed to the specifications of a specific purchaser and the charges for the modification or enhancement are separately stated continue to be exempt. Prewritten computer software or licenses purchased by consumers for personal use are taxable (Important Notice: Computer Software, North Carolina Department of Revenue, February 2010).

REFERENCE SOURCE:

http://www.salestaxinstitute.com/resources/news/north-carolina-provides-guidance-regarding-taxability-computer-software

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Customer reply replied 10 months ago
I have a client who is an IT company. They purchase Subscription Licensing for their customers that they use to manage their customers backups. They do not individually charge this item on a customer's invoice. They have bundled services that they bill monthly for customers.When they purchase those licenses, should they be charged NC sales tax?Thanks,

Hello again,

Is the IT company located in the state of NC?

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Customer reply replied 10 months ago
all of his clients are NC. I'm not sure where the company is located that he purchases the subscriptions is located.

Based on the following information, the answer is that there should not be sales tax charged. SEE BELOW:

-----------------------------------

SaaS is non-taxable in North Carolina. (Source)--SEE BELOW.

https://blog.taxjar.com/saas-sales-tax/

REFERENCE SOURCE:

https://www.dor.state.nc.us/practitioner/sales/bulletins/section28.pdf#28-3

Thank you in advance for a positive rating.

Tax.appeal.168
Tax.appeal.168, Tax Accountant
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Customer reply replied 10 months ago
thank you

You are very welcome. Thank you for the positive rating. I do appreciate it. On a different note, I recognize your username, I have answered other questions for you as well. It is pleasure assisting you.

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