Which accounting-software setup, consulting, support, and data-conversion charges were taxable in Texas?

Plain-English summary

The Comptroller identified several services as taxable when the provider also sold the accounting software: setting up a chart of accounts, advising how to structure departments or profit centers, writing instructions that supplemented the software manuals, and giving technical advice or troubleshooting for software, hardware, and peripherals.

The letter separately treated extracting customer, vendor, sales, and purchase-history information from other files and transferring it into the accounting system as taxable data processing. That data-conversion charge was taxable whether or not the provider sold the software.

What this means for you

Software implementers

Do not assume consulting or support is nontaxable merely because it is separately described. Under this letter, specified setup and advisory services became taxable when tied to the provider's software sale.

Data-migration providers

Extracting and transferring existing records was classified as data processing independently of the software sale.

Common questions

Was setting up the customer's chart of accounts taxable? Yes, when the provider sold the software.

Was troubleshooting taxable? Yes, the letter included technical advice and software or hardware troubleshooting among the taxable services tied to the software sale.

Was data migration taxable if someone else sold the software? Yes. The letter said extraction and transfer of the listed business records was taxable data processing regardless of who sold the software.

Citations and references

• 34 Tex. Admin. Code Rule 3.308 (computer hardware and software)
• 34 Tex. Admin. Code Rule 3.330 (data processing services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9201L1157A11

Original ruling text

January 30, 1992

Dear *****:

Thank you for your letter concerning the "set-up of accounting
software for microcomputers."

The following services are taxable if you sold the software to the
customer:

• accounting services such as setting up the chart of accounts, etc.

• advising user how to structure departments, profit centers and
  divisions

• written instructions to supplement the manuals provided with the
  software

• technical advice on computer system and peripherals,
  troubleshooting/diagnosis of software and/or hardware

Extraction of customers, vendors, sales and purchase histories
from other files and transferring the information to the accounting
system is data processing. This service is taxable regardless of
whether you sold the software or not.

I have enclosed a copy of Rule 3.308 on computer hardware and
software and Rule 3.330 on data processing services for your
reference.

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

Please feel free to contact me if you have any additional
questions about my response. You may write me, call toll free
1-800-252-5555, ext. 34685, from anywhere in the United States or
phone (512) 463-4685.

Sincerely,

Julie Pesl
Tax Administration Division