Virginia Software Sales and Use Tax Exempt With Proper Documentation

Virginia Software Sales and Use Tax Exempt With Proper Documentation

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Keiter State and Local Tax team leader, Terry Barrett, shares her insights on Virginia’s retail sales and use tax exemption for certain types of software and the importance of retaining tax documents in the November/December 2018 issue of VSCPA’s Disclosures Magazine article, “Purchasing software? Document, document, document.”


Purchasing Software? Document, Document, Document Excerpt:

“Software is a routine purchase for most businesses. Fortunately,Virginia (and some other states) provide an exemption from retail sales and use tax for certain types of software. This can be a much-appreciated cost-saver, whether you are implementing a costly new enterprise resource planning system or just getting started with Quickbooks. However, unwary taxpayers may find themselves denied an exemption due to documentation issues.

Software Exemption Definitions

Exempt software falls into two categories: custom computer programs and prewritten software delivered electronically (or in other than tangible format). Custom programs are generally defined as those that are specifically designed and developed only for one customer. Virginia law goes further in its distinction between prewritten and custom software by including within the definition of “custom programs”  the statements “[t]he combining of two or more prewritten programs does not constitute a custom computer program.”

Access full article.


Questions on this topic? We can help. Contact a member of the State and Local Tax team or Email | 804.747.0000

Source: VSCPA Disclosures Magazine

Additional Sales and Use Tax Resources:

Remote Sales Tax Collection After the Wayfair Decision

Terry Barrett Talks Online Sales Tax Decision and Small Businesses with Inc. Magazine

Potential Sales Use Tax Changes Impact on Virginia Businesses

“Supreme Court’s Wayfair Case Will Impact Virginia Businesses”

Virginia Businesses Are Facing Potential Sales and Use Tax Changes in 2018

State Efforts to Collect Sales Use Tax


The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.


About the Author

Keiter CPAs is a certified public accounting firm serving the audittax, accounting and consulting needs of businesses and their owners located in Richmond and across Virginia. We focus on serving emerging growth businesses and companies in the financial servicesconstructionreal estatemanufacturingretail & distribution industries and nonprofits. We also provide business valuations and forensic accounting servicesfamily office services, and inbound international services.

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