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BATON ROUGE - The second phase of the sales and use tax exclusion for custom computer software as provided for by Act 7 of the 2002 First Extraordinary Session of the Louisiana Legislature goes into effect on July 1, 2003. On that date, 50% of the sale price of custom computer software will be excluded from the definition of tangible personal property and not be subject to sales or use tax.
Act 7 defined custom computer software as “ . . . software prepared, created, adapted, or modified to the special order of a particular purchaser, licensee, or user; or to meet the specific needs or requirements of a particular purchaser, licensee, or user, regardless of the means by or through which such computer software is furnished, delivered, or transmitted, and regardless of whether such software incorporates or consists of preexisting routines, utilities, or other computer software components.” All computer software not included as part of a custom program is subject to state and local sales and use taxes.
Phase one of Act 7, which went into effect on July 1, 2002, excluded 25% of the sales price of custom computer software from the definition of tangible personal property. The exclusion is 50% this year and will rise to 75% on July 1, 2004. Effective July 1, 2005, all custom computer software becomes non-taxable.
Prior to Act 7, the sale of canned software incorporated into custom programs was treated as a sale for resale because the tax was collected on the sale of the custom program. Any sales tax paid on those purchases by custom software vendors qualified for an advance tax credit (ATC). Under Act 7, purchases of canned software for use in custom programs will not qualify as sales for resale after June 30, 2005, because once custom programs are excluded from sales tax, the purchase of canned software for use in common custom programs will be subject to use tax to be paid by the custom programmer.
Further information and examples about the exclusion from sales tax of custom computer software can be found in Revenue Ruling 02-008 dated August 28, 2002. The ruling is available on the Department of Revenue’s website at www.rev.state.la.us. Under the heading “Laws and Policies,” click on “Policy Documents,” then “Other,” and then “Revenue Rulings.” Information may also be obtained by contacting any of the following regional offices of the Department: Alexandria, 900 Murray Street, Room B-100, (318) 487-5333; Baton Rouge (Headquarters Office), 617 N. Third St, (225) 219-7356; Baton Rouge (Regional Office), 8549 United Plaza Blvd., Suite 200, (225) 922-2300; Lafayette, 825 Kaliste Saloom Road, Brandywine III, Suite, 150, (337) 262-5455; Lake Charles, One Lakeshore Drive, Suite 1550, (337) 491-2504; Monroe, 122 St. John Street, Room 105, (318) 362-3151; New Orleans, 1555 Poydras Street, Suite 900, (504) 568-5233; Shreveport, 1525 Fairfield Avenue, (318) 676-7505; and Thibodaux, 1418 Tiger Drive, (985) 447-0976.
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