In a recently issued ruling, Utah issued a Private Letter Ruling concerning the taxability of cloud-based applications. A Utah corporation requested the Utah State Tax Commission to determine whether their cloud-based applications are subject to Utah’s sales tax.  The cloud-based applications support their customers’ telecommunication equipment by instructing the equipment on how to process incoming and outgoing calls. Customers utilize the applications via their own equipment. A monthly fee is charged to customers.

Utah imposes a sales tax on various transactions, including sales involving the use of any article of tangible personal property that is granted under a license. Tangible personal property includes pre-written computer software, regardless of the manner in which the pre-written software is transferred.

In instant case, the corporation grants a license for customers to use the cloud-based applications (pre-written software) on its equipment for a monthly fee. Under Utah’s statutes, pre-written software is a taxable tangible personal property sale regardless of method of transfer.  The Commission concluded that the monthly charges for accessing the software for customers located in Utah are taxable as retail sales.