200609749L



Date: 09/19/2006

************** 

Dear **************, 

Thank you for your recent email. You provided the following information and 
question. 

“We are a software company located outside the city limits of CITY A. We have 
an out of state customer that uses our enterprise level software (meaning the 
purchased user count can be used in any number at any facility at any time as 
long as they don't exceed their total user count).  

We have been told by your office this means the entire amount would be subject 
to sales/use tax.  They are going to start using our software at two Texas 
locations (CITY B and CITY C).  Since there is no fixed user count at either 
location we were not sure how this should be taxed. Can you please advise?”

After submitting your inquiry you provided additional information via phone. 
You explained that the software at issue is installed on your customer’s server 
at the customer’s facility in Kansas.  The software is not downloaded onto 
computers at any of your customer’s locations. The software is accessed 
remotely via the Internet. It can be accessed by any of the customer’s 
locations (current OOS locations or two new Texas locations) as long as the 
user count is not exceeded. You referred to the software license as a floating 
license. 

You were previously provided with letter ruling 200104192L (example # 4) as 
support for the determination that tax would now be due on the total value 
charged for the software license because the software will be accessible by the 
two new Texas locations. You were also advised to charge tax based upon the 
customer’s Texas location that will yield the highest tax rate; which in this 
case would be CITY C. You want to verify that the charge for the software 
license is indeed 100% taxable and that the sale should be taxed at the “CITY 
C” tax rate. 

Response:   Software is tangible personal property and is subject to Texas 
sales or use tax in the same manner as other items of tangible personal 
property.  As a seller engaged in business in Texas, you are required to 
collect Texas sales tax on all taxable items delivered in this state.  Texas 
sales and use tax is not due on sales of tangible personal property that are 
mailed, shipped, or delivered outside the boundaries of this state.  

The sale of a software license for use in Texas is subject to Texas sales and 
use tax if the software is downloaded or otherwise placed on a computer in 
Texas.  See Texas Administrative Code Rule 3.308 (b)(2) .  

Based on the information you provided in your phone call, you are installing 
the software on the customer’s server in Kansas.  Since the software is being 
delivered to the customer outside of Texas, you are not required to collect 
Texas tax the sale.  The customer is responsible for accruing and remitting 
Texas use tax if they use the product in Texas.

As a member of the multistate compact, Texas will allow as a credit against 
Texas use tax due any combined amounts of legally imposed sales or use taxes 
paid on the same property to another state or any subdivision of another state. 
Credit will be allowed even though the other state may not be a member of the 
multi-state compact.  See Texas Administrative Code Rule 3.338, “Multistate Tax 
Credits and Allowance of Credit for Tax Paid to Suppliers” for additional 
information concerning credit for taxes paid to another state. 

Complete Texas sales tax information, including rules, statutes, publications, 
and frequently asked questions can be found on the Sales and Use Tax web page 
at:  http://window.state.tx.us/taxinfo/sales/.

This opinion is based on the information presented.  Other information, though 
similar, may provide a different result.  

I hope this information helps.  If you have any questions or need additional 
information, you can reply to this email, call me at 1-800-531-5441 ext. 31810, 
or write to Tax Policy Division, P. O. Box 13528, CITY A, Texas 78711-3528.

Our goal is to provide you with prompt, professional service.  Please take a 
moment to complete our on-line survey at 
http://aixtcp.cpa.state.tx.us/surveys/tpsurv2/index.html.

Sincerely,


Robin Corrigan
Tax Policy Division




ACCESSION NUMBER: 200609749L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 09/19/2006
TAX TYPE: SALES