The Georgia Department of Revenue has issued a ruling addressing whether software-based online training products to serve as communications tools for organizations are taxable. The Taxpayer addressed in the guidance sells licenses to its online educational courses and online course hosting services on its learning management system. Purchases include a course license or hosting as individual products or as a “bundle” purchase. Taxpayer additionally sells licenses for online courses owned by two other companies. Taxpayer customizes some of their products to tailor to customer needs; such customized courses are not resold.
The sale, license, or use of prewritten computer software is subject to sales and use tax in Georgia only when sold in a tangible medium. Computer software delivered electronically is not a sale of tangible personal property and therefore is not subject to sales or use tax.
Georgia defines “computer software” as “any computer data, program or routine, or any set of one or more programs or routines, which are used or intended for use to cause one or more computers, pieces of computer-related peripheral equipment, automatic processing equipment, or any combination thereof, to perform a task or set of tasks. Without limiting the generality of the foregoing, the term ‘computer software’ shall include operating programs, application programs, system programs, and any other subdivisions (such as assemblers, compilers, generators, and utility programs).”
The programs described by the Taxpayer are computer applications that are delivered to a customer online and not in tangible form. The Taxpayer hosts software as well which is online and not tangible prewritten software. The guidance notes that the Taxpayer must indicate clearly on their records that the software was delivered electronically.
Taxpayer’s charges for sales of their electronically delivered software, online courses and hosting, are not subject to sales and use tax to the extent that the customer does not receive either: (1) prewritten computer software in a tangible format or (2) the vested right to receive prewritten computer software in a tangible format. The invoice for the software purchase must indicate that the software was delivered electronically.
If you have erroneously remitted taxes on qualifying electronically delivered software, you may qualify for a tax refund. To apply for a tax refund with the Georgia Department of Revenue, Taxpayers may submit the applicable ST-12 Claim for Refund. A qualified tax attorney can assist with the execution of the application and potential questions or concerns that may arise in the process.
Jeanette Moffa is an attorney who concentrates on state and local taxes at Moffa, Sutton, & Donnini, P.A. She is also an adjunct professor and assistant editor to the American Bar Association’s The Sales and Use Tax Deskbook. For more information please call us at 888-966-8216.