Section R15-5-154. Computer Hardware and Software

A.      Gross receipts derived from services rendered in whole or in part in connection with the sale of computer hardware are exempt, including gross receipts derived from charges imposed for professional and technological services such as analysis, design, support engineering services, classroom instruction, and data conversion services.

B.       Except as provided in subsection (C), gross receipts derived from the sale of computer software programs are taxable, regardless of the method that a retail business uses to transfer the programs to its customers.

C.      Gross receipts derived from charges imposed for the following business activities originate from nontaxable service activities and are therefore not taxable:

1.        The original creation of an electronic data processing pro- gram for the specific use of an individual customer, or

2.        The modification of a prewritten computer software pro- gram for the specific use of an individual customer, if the

charge for the modification is shown separately on the sales invoice and records.

Historical Note

Renumbered from R15-5-1853 effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 11 A.A.R.

2950, effective September 10, 2005 (Supp. 05-3).