Wyoming SaaS Sales Tax: Distinguish Prewritten Software from Custom Software Services
Wyoming distinguishes between different types of software transactions.
Key rules include:
- Prewritten computer software: Generally taxable;
- Electronically delivered prewritten software: Generally taxable;
- Custom software creation services: Generally non-taxable;
- Software installation, repair, alteration, or improvement services: Generally taxable.
For SaaS businesses, the key issue is whether the customer is purchasing taxable prewritten software or receiving a custom software or service arrangement.
Prewritten Computer Software Is Generally Taxable
Wyoming provides that:
The sale of prewritten computer software is taxable regardless of whether sold on tangible storage media or delivered by the seller electronically.
Example:
Standard software license USD 1,000
If the software is prewritten and sold or licensed to multiple customers, the transaction is generally taxable.
Electronically Delivered Software Is Also Taxable
Wyoming does not exempt prewritten software merely because it is delivered electronically.
Example:
Software download USD 500
Customer:
- downloads software online;
- receives no CD;
- receives no USB;
- obtains use of prewritten software.
The transaction is generally taxable.
Digital delivery alone does not make prewritten software exempt.
Custom Software Creation Is Generally Non-Taxable
Wyoming provides different treatment for custom software creation.
The rule states:
The service of creating custom software for a person shall not be subject to the sales tax.
Example:
Custom inventory system development USD 50,000
If the software is:
- developed for a specific customer;
- designed around that customer’s requirements;
- not intended for general sale;
the custom software creation service is generally non-taxable.
The person performing the service is treated as the consumer of tangible personal property or services purchased to perform the service.
Software Installation, Repair, Alteration, and Improvement Services Are Taxable
Wyoming also taxes services involving:
- repairing computer hardware;
- altering computer hardware;
- improving computer hardware;
- repairing computer software;
- altering computer software;
- improving computer software;
- repairing canned software;
- altering canned software;
- improving canned software;
- installing software packages.
Example:
Software installation fee USD 300
Charges for installing software packages are generally taxable.
SaaS Businesses Should Review Transaction Structure
The cited Wyoming rules specifically address prewritten software, custom software, and software-related services. They do not separately define “SaaS” in the quoted provisions.
SaaS businesses should evaluate:
- whether the customer receives prewritten software;
- whether software rights are transferred;
- whether the transaction is a software service;
- whether custom software is created;
- whether installation, maintenance, alteration, or improvement services are included.
Example:
Standard SaaS Platform
A standardized platform used by multiple customers may require analysis as prewritten software or software access.
Custom SaaS Development
A system developed specifically for one customer may resemble custom software creation.
Common Wyoming SaaS Compliance Issues
Assuming electronic software is exempt
Wyoming taxes prewritten software even when delivered electronically.
Confusing SaaS with prewritten software
SaaS taxability depends on whether the transaction involves taxable prewritten software or another type of service arrangement.
Ignoring the custom software exception
True custom software creation services are generally non-taxable.
Overlooking installation and modification services
Software installation, repair, alteration, and improvement services are generally taxable.
Compliance Tips for SaaS Businesses
Businesses selling SaaS or software services in Wyoming should:
- Determine whether the product is prewritten computer software;
- Identify whether software is delivered electronically or licensed for use;
- Separate custom software creation from standard software sales;
- Separately state installation, repair, alteration, and improvement services;
- Maintain contracts, product descriptions, development records, and invoices.
Conclusion
Wyoming software tax treatment can be summarized as follows:
- Prewritten computer software: Taxable;
- Electronically delivered prewritten software: Taxable;
- Custom software creation services: Non-taxable;
- Software installation, repair, alteration, or improvement services: Taxable.
For SaaS providers, the key question is whether the transaction involves taxable prewritten software or a non-taxable custom software creation service.
Sources
Wyoming Statutes §39-15-103 https://law.justia.com/codes/wyoming/2011/title39/chapter15/section39-15-103
Wyoming Administrative Rules — Computer Hardware and Software https://www.law.cornell.edu/regulations/wyoming/011-2-Wyo-Code-R-SS-2-12