Are purchases of software licenses and support services taxable in Kansas when no prewritten software is received?

Plain-English summary

A business asked the Department whether its purchases of software licenses and support services are subject to Kansas Retailers' Sales Tax or Consumers' Compensating Use Tax.

The answer was no. Kansas taxes prewritten computer software: K.S.A. 79-3603(s) imposes sales tax on the sale of prewritten computer software and the services of modifying, altering, updating, or maintaining it, whether the software is installed, delivered on physical media, or delivered by "load and leave." But the taxpayer represented that "[t]he licenses are not for prewritten software" and that it "does not receive software … in any form or manner (i.e., physical or electronic)." With no prewritten software changing hands, the purchases of the licenses and support services are not taxable under K.S.A. 79-3603(s).

What this means for you

Businesses buying software licenses

The Kansas software tax hinges on whether you receive prewritten software. A license and support arrangement where no software is delivered to you — physically or electronically — isn't taxed as a sale of prewritten software. Because a ruling like this rests on the taxpayer's stated facts, keep documentation showing that no software is actually delivered.

Software vendors

If your license genuinely delivers no prewritten software to the Kansas customer, the charge isn't taxable under 79-3603(s) — but the analysis turns on the specific facts of delivery.

Common questions

Q: Are software licenses taxable in Kansas?
A: A license to prewritten software is taxable, but the Department ruled these particular licenses aren't, because they aren't for prewritten software and no software was received in any form.

Q: What makes the difference?
A: Whether prewritten computer software is actually delivered. K.S.A. 79-3603(s) taxes prewritten software and related services; with nothing delivered, the tax doesn't apply.

Citations and references

• K.S.A. 79-3603(s) — imposes Kansas sales tax on the sale of prewritten computer software and the services of modifying, altering, updating, or maintaining it (installed, delivered electronically, on media, or by load and leave); because no prewritten software was received here, the licenses and support services fall outside it.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2011-002

Original ruling text

Private Letter Ruling

Body:

Office of Policy and Research

May 2, 2011

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Dear XXXXXXXX,

This letter is in response to your letter whereby you inquire whether the purchases by XXXXXXXXXXXX of software licenses and support services from XXXXXXXXX are subject to Kansas Retailers’ Sales Tax or Kansas Consumers’ Compensating Use Tax.

K.S.A. 79-3603(s) imposes sales tax on “the gross receipts received from the sale of prewritten computer software and the sale of the services of modifying, altering, updating or maintaining prewritten computer software, whether the prewritten computer software is installed or delivered electronically by tangible storage media physically transferred to the purchaser or by load and leave.”

In your letter, you state that “[t]he licenses are not for prewritten software” and that “XXXXXX does not receive software from XXXXXXXX in any form or manner (i.e., physical or electronic).” Accordingly, the purchase of the software licenses and support services are not taxable under K.S.A. 79-3603(s).

This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially effects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

Date Composed: 05/10/2011 Date Modified: 05/10/2011

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