New Software Exclusions

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NC Senate Bill 490 modified G.S. 105-275(40) to exclude custom software from the property tax base. The additional wordage now reads as follows:

“The foregoing does not include development of software or any modifications to software, whether done internally by the taxpayer or externally by a third party, to meet the customer's specified needs.”

What Does This Mean?

Beginning in January of 2014, customized software will be viewed as a service. Thus, custom software services rendered will be transactions that are exempt from state sales tax - effectively changing the way that software is taxed in your jurisdiction.

Software that is purchased before customization will still be subject to taxation, but significantly enhanced additions to a commercial piece will not.

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