The GA Department of Revenue has adopted a regulation concerning the application of sales and use taxes to computer software and computer related services, as they pertain to Brick and Mortar and Click and Order transactions. Many definitions mirror those from the Streamlined Sales Tax Project.
Computer Software Sold in a Tangible Medium:
The sale, lease, rental, license, or use of prewritten software is subject to sales and use tax when sold in a tangible form. Prewritten software, even though it may be modified or enhanced to a customer’s specifications, remains prewritten software. If there is a separately stated charge on the vendor’s invoice for the modification to the software, that charge is not subject to sales and use tax.
The sale, lease, rental, license, or use of custom computer software is considered a professional service transaction and is, therefore, not subject to sales and use tax.
Computer Software Sold in an Intangible Form:
Computer software that is delivered electronically is not subject to sales and use tax because it is not a sale of tangible personal property. Upon review or under audit, the method of delivery must be documented. If it is not, it will be presumed to have been delivered through a tangible medium. It will be the taxpayer’s responsibility to prove that the software was delivered electronically. In the case of software that is delivered both electronically and through a tangible medium, the transaction will be treated as wholly taxable as tangible personal property, unless the software is custom software.
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