Rhode Island Code of Regulations › Title 280 - Department of Revenue › Chapter 20 - Division of Taxation › Subchapter 70 - Sales and Use Tax › Part 46 - Computers and Related Systems (280-RICR-20-70-46) › Section 280-RICR-20-70-46.8 - Maintenance Agreements

Current through June 14, 2024
A. For periods
				 prior to October 1, 2011, taxability as it pertains to a prewritten computer
				 software maintenance agreement or contract is based on both tangible personal
				 property, and how the updates/upgrades/services per the agreement are received.
				 A computer software maintenance contract in which updates/upgrades are
				 delivered in tangible form is taxable. Updates/upgrades delivered
				 electronically with respect to prewritten software also received electronically
				 are not subject to tax. Updates/upgrades delivered electronically with respect
				 to prewritten software received in tangible format (ex: disk or CD) are subject
				 to tax. However, a contract for mere technical support services is not subject
				 to tax. The total sale price of tangible prewritten computer software including
				 separately stated charges for computer software maintenance contracts whether
				 received electronically or in tangible format is subject to tax.
B. Effective October 1, 2011, all prewritten
				 computer software maintenance agreements or contracts delivered electronically
				 are subject to tax regardless of whether the related prewritten computer
				 software was purchased in tangible format or received electronically. However,
				 a contract for mere technical support services is not subject to tax.
C. The following examples are effective
				 October 1, 2011.
1. Example #1
A software company has the following charges to a
								customer:
Prewritten computer software $5,000.00
Software maintenance agreement ($100 per year for
								five years, paid upfront as part of purchase agreement included with software)
								$500.00
Sales Tax $385.00
Total $5,885.00
2.
				 Example #2
A software company has the following charges to a
								customer:
Prewritten computer software $5,000.00
Software maintenance agreement ($100 paid at time
								of software purchase, and $100 per year for next 4 years per purchase
								agreement) 100.00
Sales Tax 357.00
Total $5,457.00
Remaining annual payments of $100 per the computer
								software maintenance contract delivered electronically or in tangible format
								are subject to tax.
3.
				 Example #3
A software company has the following charges to a
								customer:
Prewritten computer software (tangible format or
								delivered electronically) $5,000.00
Sales Tax 350.00
Total $5,350.00
Software maintenance agreement (purchased after the
								original software purchase and received electronically) $ 500.00
Sales Tax 35.00
Total $ 535.00
Note: A computer software maintenance agreement
								purchased on or after October 1, 2011 delivered electronically or in tangible
								format is subject to tax.
4.
				 Example #4
A software company has the following charges to a
								customer:
Custom computer software (tangible)
								$5,000.00
Computer software maintenance contract ($100 per
								year for five years, paid upfront as part of purchase agreement included with
								software) 500.00
Sales Tax -0-
Total $5,500.00
Custom software and related services are not
								subject to tax.
5.
				 Example #5
An individual purchases the following:
Prewritten computer software package delivered
								electronically $200.00 *
E-book delivered via digital download 50.00
Music delivered via digital download 75.00
Ringtone delivered via digital download 5.00
Wireless (cellular) phone application 100.00
								*
Computer game delivered via digital download 50.00
								*
Sales Tax (* items subject to tax) 24.50
Total $504.50