Was a separately sold site license allowing unlimited copies of general-use software taxable in Texas?

Plain-English summary

The purchaser already had general-use software and separately bought a site license allowing unlimited copies. The Comptroller treated the charge as taxable because the sale, lease, or license of a computer program was taxable under Rule 3.308.

STAR places an official alert before the letter stating that Texas Tax Code Section 151.0032's custom-program definition was repealed effective October 1, 1987 and that the former canned-versus-custom distinction no longer applied from that date. This is historical guidance and current software rules should be checked separately.

Common questions

Was the separate site-license charge taxable? Yes.

Did it matter that the purchaser already owned the software? No. The separate right to make unlimited copies was itself treated as a taxable program license.

Did the old custom-software distinction still apply? STAR's alert says it was repealed effective October 1, 1987.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8812L0922A13

Original ruling text

NOTE: The definition of a custom computer programs (Tax Code Section 151.0032) was repealed as of 10/1/87. As of this date, there is no longer a distinction between canned computer programs or custom computer programs.

December 30, 1988

Dear **:

Thank you for your inquiry regarding the taxability of a "software site
license" for sales and use tax purposes.

Your inquiry concerns the sale of a license which grants the purchaser the
right to make unlimited copies of general use (non-custom) software previously
purchased from a vendor. Your inquiry states that the sale of the license is
separate from the original software sale. Since you state that the software is
non-custom, I assume that the software is canned.

The charge for the "software site license" is taxable since this is the license
of a computer program. Specifically, the sale, lease, or license of a computer
program is taxable as indicated in the enclosed Comptroller's Rule 3.308
(Computers-Hardware, Software, Services and Sales).

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

If you have any questions, please contact Tax Correspondence. You may call
toll free 1-800-252-5555, or our regular number is 512/463-4600. My extension
is 3-4662.

Sincerely,

Bob Jeffcoat
Tax Correspondence