A. Sales tax is levied on the gross receipts
or gross proceeds received from sales of computer hardware, computer software,
and the service of repairing or maintaining computer equipment or hardware in
any form. Software that is delivered electronically or by load and leave is not
1. "Computer" means an electronic device that
accepts information in digital or similar form and manipulates it for a result
based on a sequence of instructions.
2. "Computer software" means a set of coded
instructions designed to cause a computer or automatic data processing
equipment to perform a task. Computer software does not include software that
is delivered electronically or by load and leave.
3. "Delivered electronically" means delivered
to the purchaser by means other than tangible storage media.
4. "Electronic" means relating to technology
having electrical, digital, magnetic, wireless, optical, electromagnetic, or
5. "Load and
leave" means delivery to the purchaser by use of a tangible storage media in
which the tangible storage media is not physically transferred to the
COMPUTER SOFTWARE. The combining of two (2) or more prewritten computer
software programs or prewritten portions thereof does not cause the combination
to be other than prewritten computer software. Prewritten computer software
includes software designed and developed by the author or other creator to the
specifications of a specific purchaser when it is sold to a person other than
the specific purchaser. Prewritten computer software or a prewritten portion
thereof that is modified or enhanced to any degree, where such modification or
enhancement is designed and developed to the specifications of a specific
purchaser, remains prewritten computer software. However, where there is a
reasonable, separately stated charge or an invoice or other statement of the
price given to the purchaser for such modification or enhancement, such
modification or enhancement shall not constitute prewritten computer software.
If a person modifies or enhances computer software of which the person is not
the author or creator, then the person shall be deemed to be the author or
creator only of such person's modifications or enhancements.
D. Computers are electrical devices and any
services performed on computers, including initial installation of the computer
or any of its hardware, are taxable services. Exceptions are the parts and
labor provided under a warranty contract if the warranty is included in the
purchase price of the computer and no additional charge is made for warranty
parts or labor. Rentals and leases of computer hardware and software are
considered to be a sale for tax purposes.
E. The sale of a service contract covering
taxable repair services to computers is subject to state and local
F. Gross receipts derived from
the sale or licensing of both prewritten and custom software in Arkansas are
subject to tax whether the software sale or license is for a single use or for
multiple use, provided that the software is delivered through a tangible
medium. The licensing of software downloaded through a modem or by other
electronic means is not subject to tax if charges for the licensing are
separately stated on the invoice or billing statement from charges for any
manuals, disks, CDs, or other tangible property.
1. Hardware. Examples of hardware referred to
above are the computer itself, memory banks, and sending and receiving
2. Software. Examples of
software referred to above are tapes, disks, cards, or other devices or
materials which contain a set of coded instructions designed to cause a
computer or automatic data processing equipment to perform a task.
1. Separately stated charges for technical
support for software are not subject to tax.
2. Software programming services and the
development of custom software for a particular customer are not taxable
services. The software programming services or custom software development
services remain nontaxable even though the customer may receive a de minimis
amount of tangible personal property containing the results of programming,
such as a backup disk or manual. The true object of the transaction was the
provision of programming services and not the purchase of software on a
tangible medium. See GR-93(D)(1) and (D)(2) for guidance concerning the true
object exclusion and de minimis exclusion for bundled transactions.
3. If a nontaxable service is sold in
conjunction with tangible personal property for a non-itemized price (i.e.
software programming services and a 1,000 copies of the software delivered on a
tangible medium), then the entire transaction is subject to sales tax unless
the true object or de minimis exclusion applies. (See GR-93(D)(1) and
4. The use of prewritten
computer software in providing software programming services does not cause the
programming services to become taxable unless tangible personal property is
provided to the customer. If tangible personal property is provided, then the
taxability of the transaction will be determined by the true object exclusion
or de minimis exclusion for bundled transactions. If the sale of software
programming services is the true object of the transaction, or the tangible
personal property is de minimis, then the software programming services remain
nontaxable even though the programmer utilizes or incorporates prewritten
computer software in the performance of the programming services.