Ezel / Tax Rulings / CT
CT Ruling 89-163 Sales and Use Taxes 1989-10-27

Could an equipment manufacturer buy contractor-developed software discs for resale without Connecticut sales and use tax?

Short answer: Yes under this historical ruling only if the discs were resold unchanged and the manufacturer retained no proprietary right. Software-disc sales were otherwise taxable, even though the equipment could not operate without them. DRS says AN 94(10) partly obsoleted it.

Apply this to your situation

This page answers the general question as of 1989. Ezel answers yours, under current Connecticut tax law, with citations.

Currency note: this ruling is from 1989
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official 1989 Connecticut Department of Revenue Services Ruling reflecting the software-disc and resale rules then in effect. DRS expressly marks the information 'not current' and says Announcement (AN) 94(10) obsoleted it in part. Its resale result depended on no change or modification and no retained proprietary right. Connecticut imposes sales and use tax solely at the state level: there are no local or municipal sales taxes. This summary is informational only and is not legal or tax advice. Consult a licensed Connecticut tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Note -- partially obsolete historical guidance. DRS marks this information "not current" and states that Announcement (AN) 94(10) obsoleted the ruling in part.

Plain-English summary

X Company hired independent engineers to develop software for its equipment. It received software discs as the final product and resold them with equipment that could not operate without the discs.

DRS treated software-disc sales as taxable sales. X Company could buy the discs for resale only if it sold them without change or modification and retained no proprietary right.

What this means for you

The historical resale treatment depended on exact pass-through of the discs and rights. AN 94(10) later obsoleted the guidance in part.

Common questions

Were software-disc sales taxable? Yes under the ruling.

Could X Company use a resale certificate? Yes if both stated conditions were met.

Could the discs be changed or modified? No.

Could X Company retain proprietary rights? No.

Citations and references

  • Conn. Gen. Stat. § 12-407(2)(c), as cited in the ruling.
  • Announcement (AN) 94(10) -- identified by DRS as partly obsoleting this ruling.

Source

Original ruling text

Ruling 89-163, Software

This information is not current and is being provided for reference purposes only

Ruling 89-163

Software

This Ruling has been obsoleted in part by   AN 94(10)

You have inquired as to the sales and use tax consequences of the development of software to run equipment. X Company is an engineering and manufacturing company that contracts with independent engineering contractors to develop software to run its equipment. Software discs are the final product received from the engineer. The discs are resold as part of the equipment which cannot operate without them.

The sale of software discs is subject to the sales and use tax under the definition of "sale" and "selling" pursuant to Conn. Gen. Stat. §12-407(2)(c). X Company may purchase the software discs on a resale certificate as long as the following two conditions are met:

  1. X Company sells the software discs without change or modification; and

  2. X Company retains no proprietary right to the software discs.

LEGAL DIVISION

October 27, 1989

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