Ezel / Tax Rulings / TX
TX 8411L0600D08 Sales and/or Use Tax (State,Local,MTA) 1984-11-16

Were home-computer game cartridges, custom software, and significantly modified canned software taxable in Texas?

Short answer: Canned software, including computer-game cartridges, was taxable. Custom software and canned software that was significantly modified were not taxable.

Apply this to your situation

This page answers the general question as of 1984. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1984
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 Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas 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) is the authoritative source for any reliance.

Plain-English summary

The Texas Comptroller said new legislation imposed sales tax on canned computer software, including computer-game cartridges.

Custom computer software was not taxable. Canned software that had been significantly modified was also not taxable.

What this means for you

Software sellers

Off-the-shelf software and game cartridges fell within the taxable canned-software category described by the letter.

Custom developers

The letter distinguished custom software from canned software and treated custom software as nontaxable.

Accountants and tax professionals

Document whether the product was canned, custom, or significantly modified. The conclusion turned on that classification.

Common questions

Q: Were computer-game cartridges taxable?
A: Yes. The letter included them within canned computer software.

Q: Was custom software taxable?
A: No.

Q: Was all canned software taxable even after modification?
A: No. The letter said significantly modified canned software was not taxable.

Citations and references

  • The letter refers to new legislation but provides no bill, statute, or rule number.

Source

Original ruling text

November 16, 1984

Dear ***:

Thank you for your letter dated October 7, 1984, which was postmarked
November 3, 1984.

The new legislation imposed sales tax on canned computer software
which includes computer game cartridges. Sales tax is not due on
custom computer software nor significantly modified canned software.

This opinion is based upon the facts you presented. If there are
additional or different facts, this opinion may change.

Please feel free to contact me if you have additional questions. You
may write me, call toll free 1-800-252-5555 from anywhere in Texas
or phone, 512/475-1931.

Sincerely,

Dot Burchard
Tax Administration Division

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