Electronic Software Distribution 

The following states contain language in their tax codes that imply certain exemptions may be applicable in ESD circumstances. As tax rules and interpretations differ by state, be sure to consult with a tax professional to confirm how your state’s regulations apply to your specific purchases of electronically delivered software.

For more information on Electronic Software Distribution or to find out if a particular software publisher offers electronic delivery, please contact your SoftwareONE Account Team today!

Arkansas
http://www.dfa.arkansas.gov/offices/exciseTax/salesanduse/Documents/taxabilityMatrix2010.pdf
“Computer Related Products
-Prewritten computer software:  Taxable; Statute/Rule  A.C.A 26-52-301(1),26-52-304,26-53-109. Computer software is taxable if delivered on TPP
-Prewritten computer software delivered electronically: Exempt; Statute/Rule  A.C.A 26-52-301(1),26-52-304,26-53-109via load and leave: Exempt; Statute/Rule  A.C.A 26-52-301(1),26-52-304,26-53-109
-Non-prewritten (custom) computer software: Exempt; Custom software is considered a nontaxable programming service.  However, if TPPP is provided in conjunction with the service, then the bundled transaction rules apply.  GR-25 and GR-93”

California
http://www.boe.ca.gov/pdf/reg1502.pdf
“ (f)(1)(D) The sale or lease of a prewritten program is not a taxable transaction if the program is transferred by remote telecommunications from the seller’s place of business, to or through the purchaser’s computer, and the purchaser does not obtain possession of any tangible personal property, such as storage media, in the transaction. Likewise, the sale of a prewritten program is not a taxable transaction if the program is installed by the seller on the customer’s computer except when the seller transfers title to or possession of storage media or installation of the program is a part of the sale of the computer”

Florida
http://dor.myflorida.com/dor/pdf/fot1007.pdf
Issue: Software
Statute cites: s. 212.02, 212.05, 212.06, F.S.
Rule cite: 12A-1.032, F.A.C.
Question: Is the license to use taxpayer’s software, which is downloaded electronically by the customer subject to Florida sales tax?
Answer: The license to use software that is downloaded electronically by the customer is a service transaction and is not subject to sales tax provided it is not part of the sale of tangible personal property”

Georgia
https://etax.dor.ga.gov/salestax/st-faq.aspx#cannedsoftware 
“Q. Is canned software taxable?
A. Yes. Canned software is mass-produced pre-written software. Canned software is not designed or developed to the unique specifications of a purchaser. Only the sale or lease of canned software sold via disk or other tangible medium is subject to sales and use tax.
Q. Is custom software taxable?
A. No. Custom software is designed and developed by a person to the unique specifications of a purchaser. However, the software becomes taxable when sold to any person other than for whom it was originally designed
Q. Is load and leave software taxable?
A. No. Load and leave software is installed on-site by the seller. The seller does not leave a tangible copy of the software with the purchaser.

Iowa
http://www.iowa.gov/tax/educate/78575.html
“The sale or rental of canned software is taxable if the program is transferred by storage media. Tax does not apply to software delivered to the purchaser digitally, electronically, utilizing cable, radio waves, microwaves, satellites, or fiber optics. “Custom software” is considered the sale of an exempt service and is not taxable.”

Maryland
http://www.comp.state.md.us/special_session/SUT_ComputerServices_FAQ.pdf
“17. Is the sale of pre-written or canned computer software delivered via the internet subject to tax?
No. However, sales of computer services delivered electronically, including custom software programs, are subject to tax.”

Missouri
http://dor.mo.gov/tax/rulings/LR5919.htm
“… canned software that is downloaded electronically over the Internet is not subject to Missouri sales or use tax. ….Missouri Code of State Regulations 12 CSR 10 - 109.050(3)(A) provides:  Tax applies to the sale of canned programs delivered in a tangible medium which are transferred to and retained by the purchaser. Examples of canned programs delivered in a tangible medium would include coding sheets, cards, magnetic tape, CD-ROM or other tangible electronic distribution media on which or into which canned programs have been coded, punched or otherwise recorded. If a purchaser does not receive a tangible medium of the original canned software, there is no sale of tangible personal property under Section 144.020, RSMo.”

Nevada
http://www.leg.state.nv.us/NAC/NAC-372.html#NAC372Sec875
“NAC 372.880  Applicability of tax to prewritten computer software. (NRS 360.090, 372.725)  Unless it is delivered electronically or by load and leave, prewritten computer software is tangible personal property. The tax applies to the sale, lease, rental or licensing for use of such prewritten computer software.”

New Jersey
http://www.state.nj.us/treasury/taxation/pdf/pubs/tb/tb51.pdf
“Exemption for Sales of Electronically Delivered Software Used Exclusively and Directly in Conduct of Purchaser’s Business, Trade, or Occupation"
There is one exception to the taxability of pre-written software delivered electronically. Sales of pre-written software delivered electronically are exempt if the software is to be used directly and exclusively in the conduct of the purchaser’s business, trade, or occupation. N.J.S.A. 54:32B-8.56. This exception does not apply, however, if the software is being delivered by a “load-and-leave” method.”

Oklahoma
http://www.oar.state.ok.us/viewhtml/710_65-19-156.htm
710:65-19-156. Internet-related services and transactions
(b)    Internet-related transactions to which the tax is not applicable. The levy of sales tax does not apply to:…………
(5)    Sales of prewritten computer software that is delivered electronically. For purposes of this paragraph, "delivered electronically" means delivered to the purchaser by means other than tangible storage media. [See: 68 O.S.Supp.2003, § 1357(30)] 

South Carolina
http://www.sctax.org/NR/rdonlyres/E0D5F255-3887-481B-B9B6-DB68460D9574/0/Chapter23FrequentlyAskedQuestions.pdf
“Canned software sold and delivered by electronic means via a modem and telephone from a remote location is not subject to the sales and use tax, provided no part of the software, including back-up diskettes and tapes, is delivered by tangible means….Custom software sold and delivered by electronic means via a modem and telephone from a remote location is not subject to the sales and use tax, provided no part of the software, including back-up diskettes and tapes, is delivered by tangible means.”

Virginia
http://www.policylibrary.tax.virginia.gov/OTP/Policy.nsf
“Purely service transactions in which no tangible personal property passes to the customer are not subject to the tax. Tangible personal property used or consumed in the provision of such services is subject to the tax at the time of purchase. “

http://www.policylibrary.tax.virginia.gov/OTP/policy.nsf/df8f027f3fea473a8525697a00730
e76/64a3af10436ff559852575c9006af7e8?OpenDocument

“Accordingly, transactions involving data accessed on-line by personal computers or information sent via the Internet constitute nontaxable service transactions. See Public Document (P.D.) 01-149 (10/5/01).  There are certain minimum documentation requirements that must be met to prove the occurrence of electronically delivered software. In P.D. 05-44 (4/4/05), the Tax Commissioner ruled that at a minimum, a sales invoice, contract or other sales agreement must expressly certify the electronic delivery of the software and that no tangible medium for that software has been or is to be furnished to the customer.”

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