35 Miss. Admin. Code Pt. IV, Subpt. 5, Ch. 06 — Computer Equipment and Services

100 Computer Hardware

# 1.

"Computer Hardware" includes the components, accessories, machinery and
equipment which constitute the physical computer assembly and the internalized
instruction code which controls the basic operations (i.e. arithmetic and logic) of the
computer and which causes the computer to execute instructions contained in system
programs.

# 2.

Rate and Application of Tax
Sales, leases, or rentals of computer hardware, parts, supplies, publications or other
tangible personal property are taxable at the regular retail rate of sales or use tax
unless otherwise exempt.
101 Computer Program and Software
1. a. "Computer Program" is a series of instructions that are coded for acceptance or
use by a computer system which are designed to permit the computer system to
process data and provide results and information. The series of instruction may
be contained in or on magnetic tapes, printed instructions, or other tangible or
electronic media or downloaded via the Internet. This definition includes
computer game cartridges which allow certain games to be played on a television
set through interaction with a computer or on home computers.
b. "Computer Software" is a collection of computer programs which work in
cooperation with one another to perform automated tasks.
2. Rate and Application of the Tax
a. The gross income received from computer program or software sales and services
is taxable at the regular retail rate of sales tax. Computer program license fees
(one-time or annual) and/or maintenance contract income are taxable regardless of
how billed. Taxable services also include the design and creation of a web page
regardless of the location of the hosting server.
b. The principal line of business of the seller is not material when determining the
taxability of sales of computer programs or software. Any bank, savings and loan
or other thrift institution, accounting firm, computer program developer, dealer or
other person is deemed to be a retailer when selling computer programs or
software at retail to the final user or consumer.
102 (Reserved)
Professional Services
200 Professional Services. Professional services directly related to the technical design and
programming of computer software are taxable and are included in gross taxable income.
201 Taxable professional services include but are not limited to:
1. Charges for installing, configuring, debugging, modifying, testing, or troubleshooting
computer hardware, networks, programs or software, are taxable regardless of how
such charges are billed.
2. The recovery of damaged, deleted, or lost data or other services using ARCserve or
Norton PC Tools or other similar computer programs or software.

# 3.

The initial charges for the training of user personnel or telephone support connected
with the sale of computer hardware, programs, or software, are taxable regardless of
when or where the services are provided.
202 Non-Taxable professional services include but are not limited to:
1. Identifying management information needs.
2. Analyzing business policies and conceptual design of new procedures.
3. Accounting and legal services such as advice on tax matters, assets management,
budgetary matters, quality control, information security, operational and financial
statements, auditing and any other situation where the service provider receives data
or information and studies, alters, analyzes, interprets or adjusts such material.

# 4.

Feasibility studies including economic and technical analysis of existing or potential
computer hardware or software needs and alternatives.

# 5.

Word processing, data entry, data retrieval, data search, information compilation,
payroll and business accounting data production, and other computerized data and
information storage or manipulation services are not taxable. This also includes
charges for computer time used in providing these services.
203 However, when any of these services or other professional services is incidental to the
sale of computer hardware, software, or programs, the entire charge is taxable.
204 (Reserved)
Use Tax
300 Use Tax. Section 27 -67-3(i), defines computer software programs as tangible personal
property for use tax purposes. The regular rate of use tax is due and payable from every
person using, storing, or consuming such property within this state, possession of which
is acquired in any manner. However, software maintained on a server located outside the
state and accessible for use only via the Internet is not taxable.
301 (Reserved)
Wholesale Sales
400 Wholesale Sales. Sales of tangible personal property and services to a licensed retailer
for resale in the regular line of business are not taxable.
401 (Reserved)
Purchases
500 Purchases. Purchases or rental of equipment and purchases of supplies used by a vendor
in providing services to a user are taxable.
501 (Reserved)
Reporting Requirements
600 Adequate records must be maintained to substantiate tax classifications of sales and
purchases.
601 (Reserved)