15 Jun 2011 CA Court of Appeals Rules Licensed Software Exempt from CA Sales and Use Tax
For many years retailers and businesses have been paying California state sales and use taxes on transfers of prewritten software. California tax authorities have claimed that taxes were payable on such transfers, but in the recent case of Nortel Networks Inc. v. State Board of Equalization, the CA Court of Appeals ruled that a license for prewritten software is not subject to state sales and use tax. The ruling applied to a license subject to a patent or copyright entered into pursuant to a technology transfer agreement (TTA).
CA taxpayers who have paid sales and use tax on TTA transactions in the past or who have current TTA arrangements in place should review the tax payments they have made to determine whether the taxes were properly due and payable. There is an refund opportunity for taxpayers that discover taxes were improperly paid. Refund claims must be made before the statute deadline for the applicable tax year (generally within 3 years of the return due date); don’t let your refund opportunity lapse!Disclaimer: This blog and website are public sources of general information concerning our firm and its lawyers, as well as the information presented. They are intended, but not promised or guaranteed, to be correct, complete, and up-to-date as of the date posted. This blog and website are not intended to be, and are not, sources of legal opinion or advice. The materials, information, and communications on this blog and website do not apply to any particular person, entity, or situation, and do not apply to you or to your specific situation. You will need to consult with an attorney and/or other appropriate professional about your specific situation. Thank you.