May 12, 1982

*********** Inc. ("Company") is a data processing corporation engaged in business in Massachusetts. You inquire whether the Massachusetts sales tax applies to the Company's charges for the following:

(1) advice to clients concerning hardware or software selection, systems and program design, and general business matters;

(2) "programming services;"

(3) data processing (the Company charges separately for "data file maintenance" and for "computer output," which includes printed labels, printed listings, and magnetic tapes, prepared from a client's data file); and

(4) delivery of computer output to a client.

The Massachusetts sales tax is an excise on sales at retail of tangible personal property in Massachusetts. "Sale" is defined in General Laws Chapter 64H, Section 1(12) as including:

"(a) Any transfer of title or possession, or both, exchange, barter, lease, rental, conditional or otherwise, of tangible personal property for a consideration, in any manner or by any means whatsoever.

(b) The producing, fabricating, processing, printing or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing or imprinting

…………

(e) A transfer for a consideration of the title or possession of tangible personal property which has been produced, fabricated or printed to the special order of the customer, or of any publication.

(f) The furnishing of information by printed, mimeographed or multigraphed matter or by duplicating written or printed matter in any other manner, including the services of collecting, compiling or analyzing information of any kind or nature and furnishing reports thereof to other persons, but excluding the furnishing of information which is personal or individual in nature and which is not or may not be substantially incorporated in reports furnished to other persons..."

In determining the sales price of property on which the tax is based, no deduction may be taken on account of the cost of materials used, labor or service cost, interest charges, losses or other expenses, and any amount paid for any services that are a part of a sale must be included (G.L. c. 64H, s. 1(14)). On the other hand, professional and personal service transactions which involve no sale or involve sales as inconsequential elements for which no separate charges are made are not subject to tax (G.L. c. 64H, s. 1(13)(c)).

Separately-stated charges for transportation of tangible personal property after its sale are excluded from the sales price on which the tax is based (G.L. c. 64H, s. 1(14)(c)(v)).

The application of the Massachusetts sales and use taxes to data processing transactions is explained in Sales and Use Tax Regulation 830 CMR 64H.06 ("Automatic Data Processing"), a copy of which is enclosed.

Based on the foregoing, it is ruled that:

1. The sales tax does not apply to charges for providing advice to clients concerning hardware or software selection, systems and program design, or general business matters, where no tangible personal property is transferred to the client other than written reports of information personal or individual in nature and which is not and may not be substantially incor­porated in reports furnished to other persons.

2. The sales tax does not apply to charges for providing programmers (as on an hourly basis). The sales tax does apply to transfers of programs on tangible media, except for custom programs transferred in human-readable form. (Human-readable form does not include typed or printed sheets to be used as input media in an optical character recognition system ( see 830 CMR 64H.06(6)(c)).) The sales price of programs subject to tax includes the cost of labor or services rendered in developing the programs.

3. Where the Company maintains a data file for a client in the Company's own computer, and transfers no tangible personal property to the client other than printed listings, the sales tax does not apply to the Company's charges for the data file maintenance and output. Where the Company maintains a data file for a client in the Company's own computer and transfers information in the file in machine-readable form, or in the form of printed labels, the sales tax applies to the entire consideration paid for the output, which includes charges for updating and otherwise maintaining information in the data file.

4. The sales tax does not apply to charges for delivery of computer output to a client after the sale to the client takes place.

Very truly yours,

/s/L. Joyce Hampers

L. Joyce Hampers
Commissioner of Revenue

LJH:JXD:mf

LR 82-48