Taxpayer has no quarrel with paying sales tax on that
portion of the invoice related to the agreement providing software maintenance.
… Taxpayer's argument is that sales tax was not due on that portion of the
Vendor's invoice which related to "base fee," "user fee,"
"license fee," or "fixed agreements." In other words, these
are the costs which Vendor charges for the use of this particular software
package and not the maintenance costs.
Taxpayer bases its argument on the terms of the contract it
has with the Vendor. Taxpayer explains that it "can demonstrate, by
contract, the payment of User Fees presumes no updates, only use of software
service...." Taxpayer maintains that if it was not entitled to software
updates, then it is not required to pay sales/use tax on the use or licensing
of the software.
Taxpayer is mistaken because Taxpayer is conflating issues
related to the purchase of software and the purchase of software maintenance
services; Taxpayer is comparing apples and oranges. The issue of whether or not
software updates are provided is relevant in determining if a maintenance
contract is exempt. As stated in the Information Bulletin, in the case of
"software maintenance agreements or optional warranties," the
transactions are presumed to be taxable unless the Taxpayer can demonstrate
"that no updates were actually received." Sales Tax Information
Bulletin 2 (November 2011).
…
In this particular case, Taxpayer has acquired packaged
computer software for use in its utility business. The computer software is
marketed to a variety of different utility companies and is essentially
"canned" software. Under IC § 6-2.5-1-27, this canned software
constitutes "tangible personal property" which was acquired in a
retail transaction and is subject to the state's use tax.
