COURT OF APPEALS DECISION DATED AND RELEASED August 22, 1996 |
NOTICE |
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 95-1984
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT IV
WISCONSIN DEPARTMENT
OF REVENUE,
Petitioner-Appellant,
v.
MANPOWER
INTERNATIONAL, INC.,
Respondent-Respondent.
APPEAL from an order of
the circuit court for Dane County:
ROBERT R. PEKOWSKY, Judge. Affirmed.
Before Eich, C.J.,
Dykman, P.J., and Vergeront, J.
PER
CURIAM. The Wisconsin Department of Revenue appeals from an
order affirming a decision of the Tax Appeals Commission. The issue is whether the commission properly
determined that Manpower International, Inc. did not owe sales tax on its sale
of pre-written computer software from 1987 through 1990. We affirm.
Section 77.52(1), Stats., imposes a sales tax on the sale
or lease of tangible personal property, "including accessories,
components, attachments, parts, supplies and materials." Section 77.52(2)(a)10 imposes a sales tax on
the "repair, service, alteration ..., inspection and maintenance of all
items of tangible personal property ...."
Section 77.52(2)(a)11 imposes the tax on "the producing,
fabricating, processing, printing or imprinting of tangible personal
property" for consumers who furnish the materials used in the
process. For the period 1987 through
1990, § 77.51(20), Stats.,
1989-90, defined tangible personal property as "all tangible personal
property of every kind and description...." Section 77.51(20) has since been amended to expressly define
computer programs, except custom computer programs, as tangible personal
property.
The parties define
pre-written or "canned" software as that which "is produced in
quantity, available for sale to the public, selected by the customer to meet
the customer's hardware requirements, is generally usable by the customer as
written, and is `loaded' into the computer memory by the customer." Manpower usually delivered the canned
software on magnetic tapes or diskettes that the taxpayer placed into a computer's
magnetic tape or disc drive for copying into the computer's memory unit. The parties stipulate that the memory units
are physically altered and rearranged at the molecular level when new programs
are copied into it. The cost of the
magnetic tapes or diskettes was a minimal part of Manpower's charge for the
software. In some cases, Manpower
delivered the software by telephone.
Before the legislature
amended § 77.51(20), Stats.,
canned computer software was not "tangible personal property." In Janesville Data Center, Inc. v. DOR,
84 Wis.2d 341, 346, 267 N.W.2d 656, 658 (1978), the supreme court held that the
sale of keypunch cards, magnetic tapes and computer printouts was not taxable
because the essence of the transaction was the intangible data embodied in
these products. Here, the technology
may have advanced, but the principle remained the same; the essence of the
transaction was the sale of information offered by Manpower. Under Janesville Data Center,
information is intangible property not subject to a sales tax.
The department argues,
alternatively, that the transactions were taxable because canned software is an
accessory, component, attachment or part for the computer because the computer
is useless without software. However,
§ 77.52, Stats., imposes a
sales tax only upon the retail sales of tangible goods, not the sales of
intangibles. Janesville Data
Center, 84 Wis.2d 345, 267 N.W.2d at 658. Under the holding in Janesville Data Center,
software is an intangible and is not taxable as such, even if computers are
useless without it.
The department also
argues in the alternative that the lease of canned software is taxable as a
service under §§ 77.52(2)(a)10 and 11, Stats.,
because loading it into the computer physically alters the computer's memory
core. While that may be true, it is not
the essence of the transaction, which remains the transfer of intangible
data. Under Janesville Data
Center, such transactions therefore remained nontaxable events until
the legislature amended § 77.51(20), Stats.
By the Court.—Order
affirmed.
This opinion will not be
published. See Rule 809.23(1)(b)5, Stats.