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For Immediate Release
July 30, 2007
New Jersey Joins the Multitude of States Rehashing Its Position on
Software Taxability
Yet another technical bulletin is released by the NJ
Division of Taxation discussing the application of sales and use tax on
computer software.
New Jersey taxes tangible personal property, unless
specifically exempt or excluded from the tax base. In NJ, tangible
personal property includes pre-written computer software, including
pre-written computer software delivered electronically. It was only
recently (prior to October 1, 2006) that the state excluded software
transmitted electronically from the definition of tangible personal
property, and not subject to sales or use tax.
There is, however, an exemption for pre-written
software delivered electronically, if the software is to be used directly
or exclusively in the conduct of the purchaser’s business or trade. The
exemption does not apply if the software is delivered by the load and
leave method. If the purchaser also receives tangible storage media
containing the software, in addition to the software being delivered
electronically, the transaction is not considered to have been a sale of
software delivered electronically and is not exempt, ever if the software
is used directly and exclusively in the purchaser’s business or trade.
Also, the sale of pre-written software is taxable
regardless of whether the pre-written software is sold in its original
form, or combined with other pre-written software programs, or with
modifications to meet a purchaser’s special needs.
Custom designed software, created and written for the
exclusive use of a specific customer is not considered pre-written
software when sold to the specific customer for whom it was designed.
Custom-made software is considered a nontaxable professional service, and
therefore, is not subject to sales tax.
If you would like additional
information on this topic or have any questions,
please contact the taxdesk@thesaltgroup.com
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