Effective October 1, 2011, software delivered electronically is taxable.

Rhode Island has amended the regulations regarding the taxability of computer software and maintenance agreements. Effective October 1, 2011, the sale of pre-written (canned) software is taxable in all circumstances. Taxability is inclusive of any services (training, maintenance, consultation, etc.) that are necessary to complete the sale. The labor charges associated with the installation of the software remain exempt, as long as they are separately stated. Previous regulations had made an exemption for software that was delivered electronically or by load and leave methods.

In addition, the state has changed its taxability stance on maintenance contracts. For transactions completed prior to October 1, 2011:

1. Maintenance contracts that include updates/upgrades delivered in tangible form are taxable.
2. Maintenance contracts that include updates/upgrades delivered electronically where the original software was delivered tangibly are taxable.
3. Maintenance contracts that include updates/upgrades delivered electronically where the original software was delivered electronically are exempt from tax.
4. Maintenance contracts for technical support/training only are exempt from tax.

For transactions completed after October 1, 2011:

1. Maintenance contracts that include updates/upgrades are taxable regardless of how the original software or the updates/upgrades are delivered.
2. Maintenance contracts for technical support/training only are exempt from tax.

If you would like additional information on this topic or have any questions, please contact the taxdesk@thesaltgroup.com