Did sending a duplicate source-code copy to a California escrow agent within 90 days make the original software-media purchase taxable?

Plain-English summary

The original tangible media containing database source code remained and was used in New Hampshire for at least 100 days after purchase. The purchaser separately copied the code onto new blank media and wanted to send that duplicate to a California escrow agent before 90 days elapsed.

Early California delivery of the duplicate did not change the tax treatment of the original media. The source treated the original as not purchased for California use.

The duplicate had its own basis and entry analysis. If it entered California within 90 days after the purchaser bought the blank media, use tax applied to the blank media cost plus any copying cost, but not to the cost or value of the source code itself.

The follow-up arose from a sale of a redacted database-software group between two redacted corporations. The original plan kept the duplicate in New Hampshire for more than 90 days; the November 30 change sought earlier escrow delivery. Neither that letter nor the November 28 response on the broader sale is reproduced.

The source supplies no cited statute, regulation, or case, purchase or copying dates, costs, agreements, media records, location evidence, tax calculation, or later outcome. The live annotation locates the original software and copying in New York even though the supporting opinion repeatedly says New Hampshire; both place the escrow agent in California. Neither official source resolves that conflict, so this page follows the supporting letter for the analyzed transaction and discloses the annotation's wording.

Common questions

Did early delivery of the duplicate change tax on the original media?

No under the letter. It treated the original tangible media as distinct because it continued to be located and used in New Hampshire for at least 100 days after purchase.

What amount did counsel treat as taxable for the duplicate?

If the duplicate entered California within 90 days after the purchaser bought its blank media, counsel included the blank-media cost plus any outside cost of copying the source code onto it. The source excluded the source code's own cost or value and supplies no dollar figures.

Why did the duplicate have its own timing analysis?

The purchaser created it on newly acquired blank media rather than moving the original. Counsel therefore measured the stated 90-day period from purchase of that blank media, not from the broader software-group sale.

Where were the software and duplicate located?

The supporting January 3 letter repeatedly says the original media remained and was used in New Hampshire and the duplicate was created there. The live annotation instead says New York. Both say the duplicate went to a California escrow agent. The official materials supply no correction or explanation, so the original-and-copy location conflict remains unresolved.

What did the missing November 28 letter decide?

The January 3 response identifies it only as addressing sales- and use-tax consequences of the database-software-group sale. Its facts, authorities, assumptions, analysis, and conclusions are absent and cannot be reconstructed from this follow-up.

Is there an applied tax result?

No. The source provides no invoice, media or copying cost, entry record, computation, audit, assessment, claim, appeal, or later outcome.

Citations and references

• Original request, November 28 response, November 30 follow-up, and January 3 answer — no underlying correspondence, agreements, transaction records, cited legal authority, applied tax computation, audit, assessment, claim, appeal, or later outcome supplied
• Official Annotation 325.0012.350's historical summary and date — conflicts with the supporting letter on the original-and-copy state and omits the correspondence provenance, sale, missing records, later outcome, and reliance status and supplies no authority or additional transaction record

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 325.0012.350
• Original supporting opinion: 325.0012.350 PDF

Original ruling text

325.0012.350

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District

450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
Telephone (916) 445-6450
Fax (916) 323-3387

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento
────────

January 3, 1995

BURTON W. OLIVER
Executive Director

Mr. G--- A. W--M---, D---, B--- & E----- --- Center
--- ---, CA XXXXX

Dear Mr. W---:
This is in reply to your letter of November 30, 1994, in which you asked a followup question with respect to our letter of November 28, 1994 to your partner, R--- E---, regarding the sales and use tax consequences of a sale of the R--- database software group by D--- E--Corporation ("D---") to O--- Corporation ("O---"). Your original letter stated O--- would make a duplicate copy of the source code in New Hampshire on new blank media and retain it in New Hampshire for more than 90 days before delivery to the escrow agent in California. Your November 30, 1994 letter explained the parties would like to have this duplicate copy delivered to the escrow agent in California before 90 days have elapsed. We agree with your conclusion that the time of O---'s delivery of duplicate copy of the source code to the escrow agent in California does not affect the taxability of the original sale of the tangible media containing the original source code. We understand that the original tangible media will continue to be located and used in New Hampshire by O--- for at least 100 days after its purchase. Therefore, we would consider that O--- does not purchase that tangible personal property for use in California. O---'s later use of that property is not subject to use tax.

Mr. G--- A. W---

-2-

January 3, 1995
325.0012.350

We note, however, that if the duplicate copy of the source code is brought into California within 90 days after the blank media was purchased by O---, then the cost of that blank media plus the cost, if any, of copying the source code onto that media (but not the cost or value of the source code itself) would be subject to California use tax. Very truly yours,

Ronald L. Dick
Senior Tax Counsel

RLD:sr