Z-1174.3 _______________________________________________
SENATE BILL 6470
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State of Washington 55th Legislature 1998 Regular Session
By Senators West, Anderson, Kohl, Snyder, Loveland, Fairley, T. Sheldon and Jacobsen; by request of Governor Locke
Read first time 01/19/98. Referred to Committee on Ways & Means.
AN ACT Relating to the tax treatment of canned and custom software; adding a new section to chapter 82.04 RCW; creating a new section; and providing an effective date.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1. The legislature finds that the creation and customization of software is an area not fully addressed in our excise tax statutes, and that certainty of tax treatment is essential to the industry and consumers. Therefore, the intent of this act is to make the tax treatment of software clear and certain for developers, programmers, and consumers.
NEW SECTION. Sec. 2. A new section is added to chapter 82.04 RCW to read as follows:
(1) Software that is created for sale to more than one person is called "canned software" and is tangible personal property, regardless of the method of delivery to the consumer. Software that is provided free of charge for temporary use in viewing information is not considered tangible personal property.
(2) Software created for a single consumer is called "custom software." Its creation is a service. Amounts received for such services are taxable under the service and other classification of the business and occupation tax, RCW 82.04.290(2). Duplication of the software for the same consumer, or by the same consumer for its own use, does not change the character of the software.
(3) The customization of canned software for a single person is an activity taxable under the service and other classification of the business and occupation tax, RCW 82.04.290(2). "Customization of canned software" includes those services represented by separately stated charges for modifications, prepared to the special order of the customer, to existing canned software.
(4) For the purposes of this chapter:
(a) "Customization of canned software" is any alteration, modification, or development of applications using or incorporating canned computer software for a specific person. Customization of canned software does not change the underlying character of the software, which is tangible personal property. It includes individualized configuration of software to work with other software and computer hardware but does not include routine installation; and
(b) "Software" means any information, program, or routine, or any set of one or more programs, routines, or collections of information used, or intended for use, to convey information that causes one or more computers or pieces of computer-related peripheral equipment, or any combination thereof, to perform a task or set of tasks. Computer software includes the associated documentation that describes the code and its use, operation, and maintenance and typically is delivered with the code to the user. All software is classified as either canned or custom.
NEW SECTION. Sec. 3. This act takes effect July 1, 1998.
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