North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-04.1 - Sales and Use Taxes › Chapter 81-04.1-03 - Miscellaneous Sales › Section 81-04.1-03-11 - Computers - Hardware and software

Current through Supplement No. 393, July, 2024
Computers, peripheral computer equipment, and computer
				  software, with the exception of custom software, are subject to tax.
For purposes of administration of the sales and use tax law,
				  unless the context otherwise requires, the following definitions apply:
1. "Computer" means an electronic device that
				accepts information in digital or similar form and manipulates it for a result
				based on a sequence of instructions.
2. "Computer software" means a set of coded
				instructions designed to cause a computer or automatic data processing
				equipment to perform a task.
3.
				"Delivered electronically" means delivered from the seller to the purchaser by
				means other than tangible storage media.
4. "Load and leave" means delivery to the
				purchaser by use of a tangible storage media when the tangible storage media is
				not physically transferred to the purchaser.
5. "Prewritten computer software" means
				computer software, including prewritten upgrades, which is not designed and
				developed by the author or other creator to the specifications of a specific
				purchaser. The combining of two or more prewritten computer software programs
				or prewritten portions thereof does not cause the combination to be other than
				prewritten computer software. Prewritten computer software includes software
				designed and developed by the author or other creator to the specifications of
				a specific purchaser when it is sold to a person other than the purchaser. If a
				person modifies or enhances computer software of which the person is not the
				author or creator, the person is deemed to be the author or creator only of
				such person's modifications or enhancements. Prewritten computer software or
				the prewritten portion thereof that is modified or enhanced to any degree, if
				such modification or enhancement is designed and developed to the
				specifications of a specific purchaser, remains prewritten computer software.
				However, if there is a reasonable, separately stated charge or an invoice or
				other statement of the price given to the purchaser of such modification or
				enhancement, such modification or enhancement shall not constitute prewritten
				computer software.
6. Sale, lease,
				or rental of prewritten computer software. The transfer of title, possession,
				or use for a consideration of any prewritten computer software is taxable.
a. Tax applies to the entire amount charged
				to the customer. When the consideration consists of license fees, royalty fees,
				or program design fees, all fees present or future, whether for a period of
				minimum use or for extended periods, are includable in the purchase price
				subject to tax.
b. The sale of
				prewritten computer software is a taxable transaction, even though the program
				is delivered electronically or by load and leave. Tax does not apply to the
				sale or lease of custom computer software regardless of the form in which the
				program is transferred. If the custom computer software is not separately
				stated from the sale or lease of equipment, it will be considered taxable as
				part of the sale.
c. Maintenance
				contracts sold in connection with the sale or lease of prewritten computer
				software required by the seller as a condition of the sale or rental of
				prewritten computer software will be considered as part of the sale or rental
				of the prewritten computer software, and the gross sales price is subject to
				tax whether or not the charge for the maintenance contract is separately stated
				from the charge for the software.
d. If the purchase of the maintenance
				contract is optional with the purchaser, but the purchaser does not have the
				option to purchase the consultation services separately from the upgrades or
				enhancements, then the charges for consultation services are taxable as part of
				the sale or lease of upgrades or enhancements. If, however, the purchaser may
				at the purchaser's option, contract for the consultation services separately
				from the upgrades or enhancements, then the charges for the consultation
				services are nontaxable.
e. The
				sale of statistical reports, graphs, diagrams, microfilm, microfiche,
				photorecordings, or any other information, produced or compiled by a computer
				and sold or reproduced for sale in substantially the same form as it is
				produced is a sale of tangible personal property, unless the information from
				which such reports were compiled was furnished by the same person to whom the
				finished report is sold in which case the original report is not subject to
				tax.
f. When additional copies of
				records, reports, manuals, and tabulations are provided, tax applies to the
				charges made for the additional copies. Additional copies are all copies in
				excess of those produced simultaneously with the production of the original and
				on the same printer, when the copies are prepared by running the same program,
				by using multiple printers, by looping the program, by using different programs
				to produce the same output, or by other means.
If no separate charge is made for additional copies by the
				  service bureau or data processing firm, then tax applies to that portion of the
				  gross receipts on which the cost of the additional computer time, the cost of
				  materials, and labor costs to produce the additional copies bear to the total
				  job cost. Charges for copies produced by means of photocopying, multilithing,
				  or by other means are subject to tax.
g. Separately stated charges for training
				services are nontaxable. Tax applies to charges for training materials,
				including books and manuals furnished to trainees for a charge separate from
				the charge for training services.