On August 20, 2010, the Missouri Administrative Hearing Commission issued a 27 page ruling which concluded that software transferred under the “load and leave” method is not a taxable sale of software in Missouri. The Department had issued a few rulings stating that “load and leave” was a taxable transfer of software. In this case involving Filenet Corporation (part of IBM) the tax assessment was over $770,000 so the issue was worth litigating.
In reaching its decision, the AHC did an excellent job at outlining Missouri’s history of taxing software. This started back in 1982 with the Tres computer case. In short, for software to be taxable in Missouri there must be a transfer of tangible property from the seller to the purchaser. So long as the purchaser does not take possession or control of the media that has the software before it is loaded onto the computer, then there is no taxable sale. Under the facts in his case, the Filenet employee had control and possession of the software at all times and no one from the purchaser’s company ever touched the hard drive that held the software.
If your company has paid tax or has been assessed tax on “load and leave” software, now is the time to file a refund claim.
Missouri Load and Leave Software