Computer program licence transfers can be taxable as tangible personal property when the physical media delivered is the taxable item.

Computer program licence transactions were treated as sales of tangible personal property for sales tax purposes where the program copies were transferred on enhanced magnetic tapes. The agreement granted only a nontransferable, nonexclusive right to use the program, but the analysis focused on the physical medium used to deliver the copies rather than on the intangible licence rights. On that approach, the tapes themselves constituted the taxable tangible property, and the argument that only intangible rights or information had been transferred was rejected.

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Issues: Whether the computer program license transactions constituted a sale of tangible personal property for sales tax purposes.

Analysis: The dispute turned on the proper characterization of the transaction under the sales tax statute reaching sales of tangible personal property. The agreement granted a nontransferable and nonexclusive right to use the program, but the Court treated the transaction by reference to the physical medium on which the program copies were transferred. On that approach, the enhanced magnetic tapes themselves were the taxable tangible property, rather than merely intangible rights or information.

Conclusion: The transaction was held to involve tangible personal property and was taxable; the contention that only intangible rights or information had been transferred was rejected.

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