The Missouri Department of Revenue has issued a comprehensive letter ruling answering 12 software-related sales tax questions on issues concerning canned software, custom software, software licenses, software invoices, software installation and software maintenance agreements. Missouri Department of Revenue LR 7615, Aug. 21, 2015. In the letter ruling, the Department applies Missouri’s general software taxability regulation, Missouri Code of State Regulations § 12 CSR 10-109.050, to particular and practical inquiries by a taxpayer company. Specifically, the Department’s letter ruling provides Missouri sales tax guidance for the following software transactions:

  • Purchases of canned (“off the shelf”) software programs are not subject to sales or use tax if delivered electronically through the Internet, but are subject to sales or use tax if delivered in a tangible format.
  • Purchases of customized (special ordered) software programs are not subject to sales or use tax, regardless of whether the programs are delivered electronically or in a tangible format.
  • Purchases of licenses to use previously purchased canned software are not taxable if the original software was delivered electronically (even if subsequently copied), but are subject to sales or use tax if the software was delivered in a tangible format. 
  • Purchases of software maintenance/support delivered electronically (and remotely by phone) are not subject to sales or use tax if the original software was delivered electronically, but are generally taxable if it was canned software delivered in a tangible format (unless the maintenance/support is optional and is separately invoiced from the software) or if the maintenance/support provides for the delivery of canned software updates, upgrades or enhancements in a tangible format. 
  • Purchases of additional licenses for canned software delivered in a tangible format are not taxable unless they are part of the original transaction for the canned software.
  • Separately invoicing or separately listing on one invoice multiple software-related purchases (canned software, customized software, licenses to use canned software and/or software maintenance/support in which delivery of some of the items occurs in tangible format and others electronically) from the same vendor does not determine whether particular items are subject to sales or use tax.
  • Purchases of software programs installed by the vendor at the purchaser’s location in Missouri using a tangible storage media that is then taken away by the vendor upon installation (“load and leave” transactions) are not considered canned software deliveries in a tangible format, and thus are not subject to sales or use tax.
  • Purchases of licensed software installed at the vendor site onto servers or hardware also purchased from the vendor are considered part of the purchase of tangible personal property and, thus, are subject to sales and use tax. However, purchases of licensed software installed at the vendor site onto servers or hardware not purchased from the vendor are not considered canned software deliveries in a tangible format and, thus, are not subject to sales or use tax.