State & Local Tax Blog

Software Maintenance Contracts Taxable? It Depends.

This is a question that we get all the time. We get the questions from sellers of software and buyers of software alike. The taxability of software maintenance turns sometimes on whether it is mandatory or
optional. The taxability also depends often on exactly what is included in the “maintenance.”

Often having a “maintenance agreement” means you get software updates; sometimes it just means someone will be helping you deal with issues that come up from time to time. We’ve pulled together a taxability matrix thanks to CCH that shows the taxability of maintenance agreements in the top 5 states. When you look at the chart we’ve provided take note of the comments. It may indicate a “maintenance agreement” is taxable, but the note may say if it’s just telephone support, it’s exempt.

Keep in mind that this chart addresses the general situation. Your specific facts and circumstances may indicate a different answer. If you would like to discuss your specific situation, or if you need this chart in additional states, just give us a call.

Request the chart.

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