California Code of Regulations › Title 18 - Public Revenues › Division 1 - State Board of Equalization-Property Tax (California Department of Tax and Fee Administration - Timber Yield Tax, See Chapter 11) › Chapter 2 - Assessment › Article 3.5 - Special Classifications › Section 152 - Computer Programs Storage Media

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Computer programs shall not be valued for
				  purposes of property taxation, except with respect to the valuation of storage
				  media as provided in section
				  995
				  of the Revenue and Taxation Code. A licensor of a computer program who does not
				  own, claim, possess or control the storage media on which the program is
				  embodied or stored shall not be subject to assessment with respect to the value
				  of the licensor's copyright interest in the computer program, or with respect
				  to the value of the license fees charged for the use of the computer
				  programs.
(b) Storage media for
				  computer programs, as defined in section
				  995
				  of the Revenue and Taxation Code, shall be valued as if there were no computer
				  program on such media except basic operational programs.
(c) In accordance with Revenue and Taxation
				  Code Section
				  405,
				  storage media for computer programs shall be assessed to the person owning,
				  claiming, possessing or controlling the storage media on the lien date. Storage
				  media shall not be assessed to the owner of the copyright in the computer
				  program embodied or stored on the media if the owner of the copyright does not
				  also own, claim, possess or control the storage media subject to
				  assessment.
(d) The term "basic
				  operational program" refers to a "control program," as defined in section
				  995.2
				  of the Revenue and Taxation Code, that is included in the sale or lease price
				  of the computer equipment. A program is included in the sale or lease price of
				  computer equipment if (i) the equipment and the program are sold or leased at a
				  single price, or (ii) the purchase or lease documents set forth separate prices
				  for the equipment and the program, but the program may not be accepted or
				  rejected at the option of the customer.
(e) In valuing computer equipment that is
				  sold or leased at a single price not segregated between taxable property and
				  nontaxable programs as defined in section
				  995.2
				  of the Revenue and Taxation Code, the assessor, lacking evidence to the
				  contrary, may regard the total amount charged as indicative of the value of
				  taxable tangible property.
(f) A
				  person claiming that a single-price sale or lease includes charges for
				  nontaxable programs and services should be required to identify the nontaxable
				  property and services and supply sale prices, costs or other information that
				  will enable the assessor to make an informed judgment concerning the proper
				  value to be ascribed to taxable and nontaxable components of the
				  contract.
(g) When the nontaxable
				  components of a package composed of computer hardware, basic operational
				  programs and nontaxable programs and services may be accepted or rejected at
				  the option of the customer and the charge for each is itemized, such
				  itemization constitutes evidence of the value of the component. Prices charged,
				  whether at the wholesale or the retail level, for hardware only or hardware and
				  basic operational programs also constitute evidence of the value of such
				  property that may be used in segregating values when taxable and nontaxable
				  properties or services are covered by a single-price contract.
(h) Example 1 (Personal Computers).
Included in the price of every IBM and IBM compatible
					 personal computer and every Apple and every Apple compatible personal computer
					 is a basic input output system (BIOS). BIOS is a copyright computer program
					 that controls basic hardware operations, such as interactions with diskette
					 drives, hard disk drives and the keyboard, that the facilitates the transfer of
					 data and control instructions between the computer and peripherals. The
					 operation of other computer programs, such as the various versions of Disk
					 Operating Systems (DOS), Windows, OS/2, UNIX and similar programs, is possible
					 only through the facilities provided by BIOS, but operational programs other
					 than BIOS are not in themselves fundamental and necessary to the functioning of
					 the computer.
(2) Example 2 (Mainframe
				  Computers).
Included in the price of the IBM mainframe computers is a
					 license to use IBM's Licensed Internal Code (LIC) on the computer. LIC is a set
					 of copyrighted computer programs (commonly referred to in the computer industry
					 as microcode) that include the programs that implement the basic functions of
					 the mainframe computer and operate the control logic necessary to execute user
					 instructions to the computer. Manufacturers of other computers likewise include
					 in the price of their computers the microcode necessary to implement the basic
					 functions of the computer. The operation of other computer programs is possible
					 only through the facilities provided by microcode, but operational programs
					 other than microcode are not in themselves fundamental and necessary to the
					 functioning of the computer.