New Jersey Adopts New Software Regulations.

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Dec 05, 2014, 02:37 ET

DALLAS, Dec. 5, 2014 /PRNewswire/ -- On December 4, 2014, the New Jersey Division of Taxation (the "Division") issued new regulations and rules providing guidance related to the sales tax applicable to the sales of software and software-related services. The Division has indicated this guidance is intended to clarify existing policy.

Specific software and software-related items addressed include, but are not limited to:

Ryan is an award-winning global tax services firm, with the largest indirect and property tax practices in North America and the sixth largest corporate tax practice in the United States.

The definition of tangible personal property includes canned software, regardless if it's delivered in a tangible or electronic medium. However, electronically delivered software used for business purposes is exempted. This exemption does not apply to software-related services, including installation, maintenance, servicing or repairs, whether services are performed at the purchaser's location or from or at a seller or service provider's remote location. Note, remotely accessed software (e.g., SaaS) is not considered tangible personal property.
Modifying prewritten computer software and customer support services for a purchaser is treated as the sale of a non-enumerated service and is not subject to sales tax. Furthermore, clerical, data entry, or accounting services, etc. which may be performed with the use of software are not considered to be servicing software. The charge for these services is not subject to sales tax.
The Division confirmed that a purchaser of a software maintenance contract which includes nontaxable components that are not separately itemized on the invoice may not be subject to sales tax, provided the purchaser can provide a reasonable and verifiable method along with supporting documentation.
Furthermore, a software maintenance contract that only provides upgrades and updates is treated as a sale of pre-written computer software and is subject to sales tax, regardless of whether the software is delivered on tangible storage media or electronically. However, software maintenance contracts that include upgrades and updates only delivered electronically for use directly and exclusively in the conduct of the purchaser's business will not be taxable.
The regulations were also amended to include several definitions of certain software products and software-related services, including "custom software," "customer support services," "installing," "load and leave," "prewritten computer software," "servicing," and "software maintenance contract."

For questions regarding the new rules and regulations related to the taxability of software and software-related services, as well as potential refund opportunities, please contact Ryan's technical resource noted below.

About Ryan
Ryan is an award-winning global tax services firm, with the largest indirect and property tax practices in North America and the sixth largest corporate tax practice in the United States. Headquartered in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning. Ryan is a three-time recipient of the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 1,900 professionals and associates serves over 9,000 clients in more than 40 countries, including many of the world's most prominent Global 5000 companies. More information about Ryan can be found at www.ryan.com.

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TECHNICAL INFORMATION CONTACTS:

Mary Alice Cashin
Principal
Ryan
212.871.3901
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Jeremiah T. Lynch
Principal
Ryan
212.871.3901
[email protected]