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Can companies which provide technology support charge us sales tax?

Full Question: Can outside sources that provide us with technology support charge us sales tax? I would like a copy of the rule that either states we have to or not.

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Answer:

Diane Yetter photoIn responding to your question, we are not sure what you mean by technology support charges. We have included information regarding computer software and maintenance agreements in our discussion as there are variables that impact the taxability. If you are referring to different types of services, NC does not generally tax separately stated services and therefore most of any other type of services that might be included in what you mean by technology support charges are likely exempt. However, mandatory services on computer hardware are more likely taxable. For software maintenance agreements, these charges are for the most part taxable at this point. NC used to consider software delivered electronically exempt. However, their position on this has changed. Therefore, all software unless it is custom or otherwise meets the criteria listed below in the statute that I have included is taxable. Maintenance contracts - both mandatory and optional are also all generally taxable. The one exception is if there is an optional maintenance contract that separately states the charges for customer support services from the updates/bug fixes. In this case, the separately stated charges for the customer support is exempt. The current NC Statutes state the following types of computer software are exempt. They have not yet updated the regulations and therefore they should not be followed. The Streamlined Sales Tax Taxability Matrix has the current positions which can be found at http://www.streamlinedsalestax.org/uploads/downloads/State%20Compliance/North%20Carolina/2011/North%20Carolina%20Taxability%20Matrix%202011%20revised%2010_21_2011.pdf 105-164.13(43) - Custom computer software - Custom computer software and the portion of prewritten computer software that is modified or enhanced if the modification or enhancement is designed and developed to the specifications of a specific purchaser and the charges for the modification or enhancement are separately stated. 105-164.13(43a) - Computer software that meets any of the following descriptions: 105-164.13(43a)a - It is designed to run on an enterprise server operating system. 105-164.13(43a)b - It is sold to a person who operates a datacenter and is used within the datacenter. 105-164.13(43a)c - It is sold to a person who provides cable service, telecommunications service, or video programming and is used to provide ancillary service, cable service, Internet access service, telecommunications service, or video programming. 105-164.13(43b) - Computer software or digital property that becomes a component part of other computer software or digital property that is offered for sale or of a service that is offered for sale. The other documents published by NC are not current and should not be relied on.

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