In a much anticipated sales tax decision, a Wisconsin appellate court determined that a taxpayer’s purchase of certain business and accounting software was a nontaxable transaction involving “custom” software. In rendering its decision, the court considered various factors. However, a determinative factor appeared to be that although the software was generally sold in a standard, unmodified form, modification of the software was required for it to be usable in a purchaser’s operations. The court noted that the required modification permitted the software to be characterized as nontaxable “custom” software, despite the fact that the actual modification was not part of the sale contract. Although this appellate court decision remains subject to further appeal, if sustained it may create tax reduction and/or refund opportunities for certain software implementations. For calendar year taxpayers, the deadline for filing refund claims or for extending the time to file a refund claim for 2002 is March 15, 2007.
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