Recently Georgia’s Department of Revenue (“Department”) issued Letter Ruling SUT 2014-02-20-01 regarding software and cloud service transactions. A Georgia taxpayer requested the Department to determine whether these transactions are subject to Georgia’s sales and use tax. The taxpayer sells pre-written software, software modifications delivered electronically via the taxpayer’s site. The taxpayer is also a reseller of cloud subscription services that allows a customer to access and use vendor software via the internet.

Georgia imposes a sales tax on tangible personal property which includes pre-written software delivered via tangible medium. In the Ruling, Georgia confirms its position that when pre-written software is only delivered electronically, the software is not taxable. The same rule applies to the taxpayer’s pre-written software modifications. In addition, Georgia stated that the cloud computing subscriptions did not involve the transfer of tangible personal property or an enumerated service; and were thus, nontaxable.