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Answer Answer. ?Tangible personal property? exists physically (i.e., you can touch it) and can be used or consumed.
Lease tax also applies to applications available to customers through access to a provider's computer and software (e.g., cloud computing, cloud services, hosted environment, SaaS, platform as a service (PaaS), and infrastructure as a service (IaaS)).
Illinois. 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.
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.
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.
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).
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.
Generally, canned software is taxed in all delivery methods or only when delivered via tangible medium. States consider the software itself to be tangible personal property, taxed explicitly, or the inseparable tangible property obtained by its tangible delivery medium makes the software taxable by inference.