Utah State Tax Commission to clarify rule on taxation of custom software


On October 15, 2022, the Utah State Tax Commission published a proposed amendment to its rule governing the taxation of custom software for sales and use tax purposes, clarifying that the sale, rental or lease of custom computer software constitutes a sale of personal services that is not subject to tax, regardless of the form in which the software is purchased. The proposed amendment is a clarification of the Tax Commission’s longstanding position that such transactions are not subject to the sales and use tax. Under the current rule, charges for services such as software maintenance, consultation in connection with a sale or lease, enhancements, or upgrading of custom software likewise are not taxable.

According to the notice, comments on the proposed amendment are due November 14, 2022, and, if approved, the amendment is expected to take effect on November 21, 2022.

UTAH STATE BULLETIN, October 15, 2022, Vol. 2022, No. 20, R865-19S-92.