Tax Article - Proposed New Computer Regulation for Computer Industry Services and Products for Sales and Use Tax

General Rule

Sales in Massachusetts of computer equipment, prewritten computer software, regardless of the method of delivery, and report of standard information in tangible form are generally subject to the Massachusetts sales and use tax. Taxable transfers of prewritten software include sales affected in any of following ways, regardless of the delivery method, electronic or load and leave:

In the instances of licenses, leases, upgrades, and transfers of rights to use software installed on a remote server, the vendor collects sales tax from the purchaser and pays the sales tax to the Commissioner.

Sales of custom software, personal and professional services, and reports of individual information are generally exempt from MA sales and use tax.

Sales, Leases, and Rentals of Computer Equipment

• Sales, leases, rental, and installment sales of new or used computer equipment are generally taxable.
• Separately stated charges for installing computer equipment of any type are not taxable, so long as the charges are reasonable and set in good faith.
• Leases of computer equipment are generally taxable.
• Collection and payment of sales tax on leases: the lessor of computer equipment will collect and pay sales tax on lease and rental payments with each payment. A lessor's gross receipts for any period are the amounts due during that period under the lease terms.
• Leases include agreements under which a person has access to computer equipment off-site, if that person or person's employee operates, directs, or controls the computer equipment.
• Installment sales of computer equipment are generally taxable.
• Separately stated interest charges under installment sales contracts are not included in the sale price subject to tax as long as the interest charges are set in good faith.
• The fair market value of traded-in computer equipment as of the date of the trade-in is ordinarily included in the sales price subject to sales tax as part of the consideration. If an item of computer equipment is returned to a vendor in connection with the purchase of computer equipment and that item has no value, the item is not part of the consideration for the purchase of computer equipment.
• In an instance when computer equipment cannot be purchased without service—such as training, maintenance, custom software development, and testing—charges for the services are generally taxable, even if separately stated.
• Optional services are not considered part of the sales price for the equipment and are generally exempt.
  

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