SECTION 710:65-19-52. Computers and related systems; "hardware" and "software" defined

(a)   Definitions. The following words and terms, when used in this Section, shall have the following meaning, unless the context clearly indicates otherwise:

(1)   "Computer" means an electronic device that accepts information in digital or similar form and manipulates it for a result based on a sequence of instructions. [68 O.S.§ 1352(4)]

(2)   "Computer hardware" means the machine and all of its components and accessories that make up the physical computer assembly.

(3)   "Computer software" means a set of coded instructions designed to cause a "computer" or automatic data processing equipment to perform a task. [68 O.S.§ 1352(5)]

(4)   "Computer software maintenance contract" means a contract that obligates a vendor of computer software to provide a customer with future updates or upgrades to computer software, support services with respect to computer software or both.

(5)   "Electronic" means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities. [68 O.S.§ 1352(9)]

(6)   "Load and leave" means delivery to the purchaser by use of a tangible storage media where the tangible storage media is not physically transferred to the purchaser.

(7)   "Prewritten computer software" means "computer software", including prewritten upgrades, which is not designed and developed by the author or other creator to the specifications of a specific purchaser. The combining of two or more prewritten computer software programs or prewritten portions thereof does not cause the combination to be other than prewritten computer software. Prewritten software includes software designed and developed by the author or other creator to the specifications of a specific purchaser when it is sold to a person other than the purchaser. [68 O.S.§ 1352(20)]

(8)   "Mandatory computer software maintenance contract" means a computer software maintenance contract that the customer is obligated by contract to purchase as a condition to the retail sale of computer software.

(9)   "Optional computer maintenance contract" means a computer software maintenance contract that a customer is not obligated to purchase as a condition to the retail sale of computer software.

(b)   Sale or rental of a computer. The sale of a computer and its related components is subject to sales or use tax. The rental of a computer and its related components, including terminal equipment (hardware) is subject to sales tax.

(c)   Sale of prewritten computer software. The sale of prewritten computer software delivered in a tangible media format is taxable. Prewritten computer software delivered by means of "load and leave" is also taxable.

(d)   Maintenance contract sold with prewritten computer software. The taxability of a maintenance contract sold with prewritten computer software delivered in a tangible media format depends on whether the maintenance contract is mandatory or optional.

(1)   If the contract is mandatory, the entire sale price, including the charge for the contract, is subject to tax.

(2)   The charge for an optional contract shall be subject to taxation:

(A)   If it provides only upgrades or updates which include prewritten computer software delivered in a tangible media format; or,

(B)   If it provides both upgrades or updates and support services, and the fee for the support services is not stated separately.

(3)   If the contract is optional and provides only maintenance agreement support services, the contract is not taxable.

(e)   Written training materials. Written training materials are taxable, although the training services themselves are not.

(f)   Modifications to prewritten computer software. Modifications to "prewritten computer software" do not result in the production of custom computer software. Where a person modifies or enhances computer software of which the person is not the author or creator, the person shall be deemed to be the author or creator only of such person's modifications or enhancements. Prewritten software or a prewritten portion thereof that is modified or enhanced to any degree, where such modification or enhancement is designed and developed to the specifications of a specific purchaser, remains prewritten software; provided, however, that where there is a reasonable, separately-stated charge or an invoice or other statement of the price is given to the purchaser for such modification or enhancement, such modification or enhancement shall not constitute prewritten computer software. [68 O.S.§ 1352(20)]

(g)   Custom computer software. For purposes of this Section, the term "custom computer software" means a program prepared to the special order of a customer. The sale of a custom computer program is a service transaction, and therefore, is not subject to tax. In addition, charges for maintenance are not taxable.

(h)   Software purchased with computer. The charge for prewritten computer software purchased with a computer is subject to tax. If a computer is bought with custom software and the charge for the software is not separately stated, the entire purchase price is subject to tax. In addition, the entire charge is subject to tax if modifications are required and the charge for the modifications is not separately stated and records do not adequately document the extent of the modifications.

[Source: Amended at 11 Ok Reg 3521, eff 6-26-94; Amended at 21 Ok Reg 2581, eff 6-25-04; Amended at 27 Ok Reg 2308, eff 7-11-10; Amended at 29 Ok Reg 542, eff 5-11-12]