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In February 2011, the California superior court held that royalties for licensing of computer software to California licensees constituted receipts from the sale of tangible personal property, and sales of tangible property are sourced to the state the property is shipped to (Microsoft Corporation v.
Software taxes: Chicago vs. Chicago is one home rule city that taxes SaaS while its state, Illinois, does not. While Illinois does tax various kinds of software, SaaS delivered via a cloud-based system is exempt from sales tax, as long as tangible personal property is not transferred as part of the transaction.
For more information about common exemptions, see Publication 104, Common Sales and Use Tax Exemptions. Sales to state, local, and federal governments. Sales to not-for-profit organizations that are exclusively charitable, religious, or educational. Sales of newspapers and magazines.
Generally, sales of ?canned? computer software are taxable retail sales in Illinois. Canned computer software is considered to be tangible personal property regardless of the form in which it is transferred or transmitted, including tape, disc, card, electronic means, or other media.
The IDOR notes that software maintenance agreements are not taxable if the agreements for the maintenance of tangible personal property are sold separately from the tangible personal property.
Retail sales of canned software (pre-written software) which is intended for general or repeated use, regardless of the form in which it is transmitted, including electronic means (i.e., downloaded), is subject to tax. A license of computer software is not taxable if specific conditions are met. 86 Ill. Adm.
Answer Answer. ?Tangible personal property? exists physically (i.e., you can touch it) and can be used or consumed.
While software is not physical or tangible in the traditional sense, accounting rules allow businesses to capitalize software as if it were a tangible asset. Software that is purchased by a firm that meets certain criteria can be treated as if it were property, plant, & equipment (PP&E).