Michigan Sales Tax On Software Maintenance «2K»

Michigan's 6% sales and use tax applies to "tangible personal property," which the state defines to include (canned) computer software. Maintenance agreements follow these specific triggers:

When a transaction includes both taxable software and exempt services, Michigan uses this test to determine if the primary "object" of the sale is a service or a product. If the software is merely incidental to a professional service, the whole transaction may be exempt. Compliance Tips To protect against audit risks, businesses should: Michigan Sales Tax On Software Maintenance

Specific charges for technical support or for adapting prewritten software to a user's needs are exempt if they are separately stated and identified on the invoice. Michigan's 6% sales and use tax applies to

Maintenance contracts for custom software (designed for a specific user's needs) are generally considered non-taxable services. Critical Factors and Exemptions Compliance Tips To protect against audit risks, businesses

If a maintenance agreement is required as part of the purchase of taxable prewritten software and includes future updates or enhancements, the entire cost is generally taxable . Optional Agreements:

When claiming an exemption, ensure Michigan Form 3372 (Sales and Use Tax Certificate of Exemption) is correctly executed.

Always break out installation, support, and training charges from the software license fee to preserve exemptions.