34 Tex. Admin. Code § 3.308 - Computers-Hardware, Computer Programs, Services, and Sales
(a) Definitions. The following words and
terms, when used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1)
Computer program--A series of instructions that are coded for acceptance or use
by a computer system and that are designed to permit the computer system to
process data and provide results and information. The series of instructions
may be contained in or on magnetic tapes, semiconductor chips, punched cards,
printed instructions, or other tangible or electronic media.
(2) Contract programming--Services to create
or develop a new computer program, or to repair, maintain, modify, or restore
an existing computer program, when the person performing the services did not
sell, and retains no rights in, the computer program being created, developed,
repaired, maintained, modified, or restored.
(A) Examples of contract programming include:
(i) writing a new computer program to perform
a particular function for the customer where all rights in the program are
transferred to the customer;
(ii)
customizing a computer program owned by the customer or licensed to the
customer by a third party; or
(iii)
modifying a computer program or performing repair, maintenance, or restoration
on a computer program that the programmer wrote for the customer under a prior
contract programming agreement.
(B) Contract programming only occurs when the
person performing the programming services transfers all rights, including
intellectual property rights such as those rights arising from copyrights,
patents, and trade secret laws, to the computer program being created,
developed, modified, maintained, repaired, or restored to the purchaser of the
contract programming services. Notwithstanding other provisions of this
paragraph, a person performing contract programming services may retain rights
to property including materials, tools, methods, and processes used in the
performance of the service. A person performing contract programming services
may also retain rights to an incidental program or incidental component of a
program included under an agreement to provide contract programming services.
Examples of incidental programs and incidental components of a program are
installers, drivers, macros, and subroutines.
(3) Internet hosting--Providing to an
unrelated user access over the Internet to computer services using property
that is owned or leased and managed by the provider and on which the user may
store or process the user's own data or use software that is owned, licensed,
or leased by the user or provider. The term does not include telecommunications
services.
(b) Hardware.
(1) The sale, lease, or rental of computer
hardware, including central processing units and all peripheral equipment,
parts, and supplies, is subject to the sales and use tax.
(2) A taxable rental or lease can occur
without the right to move the hardware if the lessee has total operational
control of the hardware. For example, a lessee may contract to use a computer
on the owner's premises for an exact period of time weekly. The lessee provides
the operator and all materials. During the time of use by the lessee, no one
else may use the hardware. This transaction constitutes a transfer of the total
operational control of the hardware, which is a lease or rental of tangible
personal property. However, if the owner provides and directs the operator,
operational control has not been transferred to the lessee. The transaction
will not be considered the rental or lease of the hardware. Note: if the only
supervision provided by the owner is for maintenance or training on proper use,
this is not providing an operator. See §
3.294 of this title (relating to
Rental and Lease of Tangible Personal Property).
(3) Sales tax is due on charges for labor or
services rendered in installing or applying computer hardware.
(4) Sales tax is due on charges for labor or
services rendered in remodeling, repairing, maintaining, or restoring computer
hardware. See §
3.292 of this title (relating to
Repair, Remodeling, Maintenance, and Restoration of Tangible Personal
Property).
(5) Installation charges
for remote terminals are taxable whether or not separately stated. Charges for
telephone lines are taxable.
(c) Computer programs and related services.
(1) Computer programs.
(A) The sale, lease, or license of a computer
program is a sale of tangible personal property. Tax is due when the computer
program, or a license to use the computer program, is transferred for
consideration in Texas, or stored, used, or consumed in Texas, in electronic
form or on physical media.
(B)
Sales price. The sales price of a computer program includes all charges made in
connection with the sale of the program, which may include charges for
installation, modification, repair, maintenance, or restoration, whether or not
separately stated.
(C) The sales
price of a computer program, or a single license for a computer program, that
is sold or used in Texas may not be allocated to other states based on the
purchaser making copies of the program for use in another state; installing the
program on hardware located in another state; or accessing the program in
another state.
(2)
Computer program repair, maintenance, and restoration. Charges for computer
program repair, maintenance, or restoration by a person who sold the computer
program are taxable. Computer program repair, maintenance, or restoration
includes error correction, technical fixes, and technical support, whether
provided over the Internet or over the phone.
(3) Instruction. Separately stated charges
for instruction on the use of the computer program by a person who sold the
computer program are not taxable.
(4) Contract programming services. Contract
programming may result in the creation of tangible personal property, but it
does not constitute the sale thereof. Charges for contract programming are
charges for a service and are not taxable.
(d) Sales. The following are examples of
transactions which involve the sale of taxable items and are taxable.
(1) A separate charge for additional copies
of the result of services is taxable.
(2) The charge for processing, printing, or
producing tangible personal property by a computer is taxable unless the
processing, printing, or producing is performed as an incidental part of a
nontaxable service. Examples of taxable processing, printing, or producing
include standardized amortization or depreciation tables, newsletters, and
advertising.
(e) Sales
for resale.
(1) A resale certificate may be
issued by a purchaser only if hardware or a computer program is purchased for
the exclusive purpose of resale. If the purchaser makes a taxable use of the
hardware or computer program while holding it for resale, the purchaser is
liable for sales tax. See §
3.285 of this title (relating to
Resale Certificate; Sales for Resale).
(2) Internet hosting providers.
(A) A sale for resale includes the sale of a
computer program to an Internet hosting provider in a transaction that meets
all criteria in this subparagraph, regardless of whether care, custody, and
control of the computer program is transferred to the user of the Internet
hosting service.
(i) The Internet hosting
provider acquires the program from an unrelated vendor for the purpose of
selling the right to use the program to an unrelated user of the provider's
Internet hosting services in the normal course of business and in the form or
condition in which the provider acquired the program;
(ii) the Internet hosting provider offers the
unrelated user a selection of computer programs that are available to the
public for purchase directly from an unrelated vendor;
(iii) the Internet hosting provider executes
a written contract with the unrelated user that specifies the name of the
computer program sold to the unrelated user and includes a charge to the
unrelated user for computing hardware;
(iv) the unrelated user purchases the right
to use the computer program from the Internet hosting provider through the
acquisition of a license; and
(v)
the Internet hosting provider does not retain the right to use the computer
program under that license.
(B) The performance by the Internet hosting
provider of routine maintenance of the computer program that is recommended or
required by the unrelated vendor of the computer program does not affect the
application of subparagraph (A) of this paragraph.
Notes
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