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According to our interpretation of California state regulations,
Cafésoft is not currently required to charge a sales tax
to customers within or outside of California for software and documentation
that is electronically distributed over the Internet. This document
provides you with resource links that explain the current California
state policy. Please note, however, that this document is not a
legal opinion. You should employ your own legal counsel for a legal
opinion on this subject and how it applies to you.
Sales Tax on Software to California Buyers
The following information was extracted from regulation
1502 of the California State Board of Equalization (pdf). We
have extracted only the information that we feel is directly applicable
to our transactions, which are all conducted by remote telecommunications
from our place of business to your place of business within California.
We interpret this to apply to our sale and transfer of software
over the Internet and world wide web to our California-based customers.
You are encouraged to obtain a copy of the full document for your
review from the California State Board of Equalization.
If you are unable to access or read the regulation on line, you
may obtain a copy of the regulation by
contacting the California State Board of Equalization.
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State of California
BOARD OF EQUALIZATION
SALES AND USE TAX REGULATIONS
Regulation 1502. COMPUTERS, PROGRAMS, AND DATA PROCESSING.
Reference: Sections 995.2, 6006, 6007, 6010,
6010.9, 6011, 6012, 6015, and 6016, Revenue and Taxation Code.
(b) DEFINITIONS OF TERMS.
Prewritten Program - A program held or existing for general
or repeated sale or lease. The term also includes a program
developed for in-house use which is subsequently offered for
sale or lease as a product.
(f) COMPUTER PROGRAMS.
(D) The sale or lease of a prewritten program is not a taxable
transaction if the program is transferred by remote telecommunications
from the seller's place of business, to or through the purchaser's
computer and the purchaser does not obtain possession of any
tangible personal property, such as storage media, in the
transaction. Likewise, the sale of a prewritten program is
not a taxable transaction if the program is installed by the
seller on the customer's computer except when the seller transfers
title to or possession of storage media or the installation
of the program is a part of the sale of the computer.
If the transfer of a prewritten program is a nontaxable transaction,
then the seller is the consumer of tangible personal property
used to produce written documentation or manuals (including
documentation or manuals in machine-readable form) designed
to facilitate the use of the program and transferred to the
purchaser for no additional charge. If a separate charge is
made for the documentation or manuals, then tax applies to
the separate charge.
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Some Internet Sales are not taxable
The following is excerpted from California
Board of Equalization Publication 109, Are your Internet Sales Taxable?
(pdf).
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Products electronically transmitted to
customers
Your sale of electronic data products such as software, data,
and digital images is generally not taxable when you transmit
the data to your customer over the Internet or by modem. However,
if as part of the sale you provide your customer with a printed
copy of the electronically transferred information or a backup
data copy on a physical storage medium such as a CD-ROM or
diskette, your entire sale is usually taxable.
For example, if your company sells canned (non-custom) software
programs to customers who download them from a server, those
sales are generally not subject to tax. However, if you also
provide your customers with a backup copy on a CD-ROM, the
entire transaction is taxable. Similarly, if you transmit
a stock (non-custom) database to your customer over the Internet
and also provide a printed copy of the contents, the entire
sale is subject to tax.
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Sales Tax on Software to Buyers outside of California
In general, sales from a California retailer to a buyer outside
the state of California are not subject to California sales tax
as indicated in California
State Board of Equalization's Regulation
1620 - Interstate and Foreign Commerce (pdf).
You may be subject to local or jurisdiction taxes such as "use
tax", "value added tax", or "property tax". It is your responsibility
to determine such liabilities and to comply with them.
Responsibility for Taxes
Paragraph 10 of our software license agreement
states that you are responsible for any and all tax liability in
respect to your purchase and use of a license to use our software.
10. TAXES. You shall pay or reimburse Cafesoft for all federal,
state, local
or other taxes including, but not limited to, sales, use, value-added,
privilege
and property taxes, or amounts levied in lieu thereof, based on
fees payable
under this Agreement or based on the Product, its use or any services
performed.
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