Does Georgia tax a single-price bundle of electronically delivered software, implementation, installation, upgrades, updates, and technical support?

Plain-English summary

The Department did not tax the single-price bundle. Software delivered only electronically was not tangible personal property, provided the customer received neither a tangible copy nor a right to receive one. The invoice, contract, or other documentation also had to show electronic delivery; otherwise tangible delivery was presumed unless the taxpayer proved otherwise.

Implementation, installation, upgrades, updates, and technical support were not services specifically designated as taxable under Georgia law. Because both the electronically delivered software and the related services were nontaxable, their combined charge remained nontaxable even without itemization. The seller still owed sales or use tax on tangible property it consumed to provide the services.

Common questions

Q: What if the customer also receives the software on tangible media?

A: The ruling says the transaction becomes a taxable sale of tangible personal property if the same software is also provided on a tangible medium or the customer receives a right to tangible property.

Q: Must the software and services be separately itemized?

A: No. Because both components were nontaxable on these facts, the single bundled charge was nontaxable regardless of itemization.

Citations and references

• Ga. Comp. R. & Regs. r. 560-12-2-.111(2)(f), (4)(a)-(b) -- electronic software delivery
• O.C.G.A. §§ 48-8-3(22), 48-8-30(a) -- services and taxable sales
• O.C.G.A. § 48-8-63(b) -- property consumed by service providers
• Ga. Comp. R. & Regs. r. 560-12-2-.26(1) -- service providers as consumers

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2016-09

Original ruling text

Date Issues: March 30, 2016
Georgia Letter Ruling: LR SUT-2016-09
Topic: Software and Software Related

This letter is in response to your request for guidance on the application of Georgia sales and use tax to certain products
and services offered by [Redacted] (“Taxpayer”).
Facts as Presented by Taxpayer
Taxpayer offers messaging security software products that protect communication service provider networks and their
subscribers against messaging threats. Taxpayer’s products and services maximize security and control across
messaging environments to intercept and remove the challenges of cyber-attacks. The software is designed to enable
communication service providers to create a safe user experience and reduce operational costs.
Taxpayer also sells software-related services. Taxpayer often sells software products and services in a single price to
customers. The bundled products typically include all of the following components in one single price:




Computer software – The prewritten software is sold and delivered electronically to customers.
Professional services – These services include (a) implementation and (b) installation services in order for
the software to be fully functional at its inception.
Upgrades, updates, and technical support – Computer upgrade are major revisions to the software, while
computer updates are minor revisions to the software. Taxpayer also provides technical support for
customers.

Issue
Are Taxpayer’s sales of bundled products, which are sold at a single price for both software and software-related
services as described above, subject to Georgia sales and use taxes?
Analysis
Georgia levies and imposes a tax (subject to certain specific exemptions) on the retail purchase, retail sale, storage,
use, or consumption of tangible personal property, certain enumerated services, and utilities. 1
Computer Software
Computer software is considered to be delivered electronically if it is delivered to the purchaser by means other than
tangible storage media.2 Computer software delivered electronically is not a sale of tangible personal property and
therefore is not subject to sales or use tax. The dealer’s invoice, purchase contract, or other documentation must
indicate the method of delivery. If the method of delivery is not indicated on the dealer’s invoice, purchase contract,
or other documentation, delivery will be presumed to have been made in a tangible format, and the burden will be
upon the taxpayer to establish to the satisfaction of the Department that the computer software was delivered
electronically.3
If a dealer delivers computer software electronically and also provides the same software to the purchaser in a tangible
medium, the transaction is a taxable sale of tangible personal property.4 Additionally, when a customer receives the
rights to tangible personal property as part of a sale, the sale is considered the sale of tangible personal property and
subject to tax regardless of whether the customer takes possession of the property purchased.

1

O.C.G.A. §§ 48-8-1, 48-8-2(31)(A), and 48-8-30(a).
Ga. Comp. R. & Regs. r. 560-12-2-.111(2)(f).
3
Ga. Comp. R. & Regs. r. 560-12-2-.111(4)(a).
4
Ga. Comp. R. & Regs. r. 560-12-2-.111(4)(b).
2

Date Issues: March 30, 2016
Georgia Letter Ruling: LR SUT-2016-09
Page 2 of 2

Software-related Services
Unlike sales of tangible personal property, which are generally presumed taxable, sales of services are not subject to
the tax unless the service is specifically designated as taxable.5 Georgia Code does not identify software-related
services as taxable services.
Service providers are end-users and consumers of the materials they buy, use, or consume in providing a service. They
must pay the sales tax at the time of purchase of such materials. If the tax is not paid at the time of purchase or if the
purchase was made out of state, service providers are liable for the payment of the sales or use tax. 6
Ruling
Taxpayer’s charges for sales of electronically-delivered software are not subject to tax to the extent that the customer
does not receive the software in a tangible medium nor receive any right to the software in a tangible medium. The
customer’s invoice or supporting documentation must indicate that the software was delivered to the customer
exclusively in an electronic format.
Software-related services are not specifically identified in the Georgia Code as services subject to tax. Thus, charges
made by Taxpayer for software-related services, including implementation, installation, upgrades, updates, and
technical support, are not subject to the tax. However, Taxpayer is liable for tax on all tangible personal property used
to provide its software-related services. Given that neither Taxpayer’s sales of electronically delivered software nor
Taxpayer’s sales of software-related services are subject to tax, charges made for these products and services are not
subject to tax regardless of itemization on the customer’s invoice.
The opinions expressed in this ruling are based upon the information contained in your request and limited to the
specific transactions, facts, circumstances, and taxpayer in question. Should the circumstances regarding the
transactions change or differ materially from those represented, this ruling may become invalid. Subsequent statutory
or administrative rule changes or judicial interpretations of the statutes or rules upon which this ruling is based may
subject similar future transactions to different tax treatment than that expressed in this ruling.

5

O.C.G.A. §§ 48-8-3(22) and 48-8-30(a).
See O.C.G.A. § 48-8-63(b) (although this statute specifically addresses contractors, it contains the general rule for
all service providers); Ga. Comp. R. & Regs. r. 560-12-2-.26(1).
6