• Potentially Disruptive California Sales Tax Decision
  • June 20, 2011 | Authors: David E. Cowling; Roburt J. Waldow
  • Law Firms: Jones Day - Dallas Office ; Jones Day - Irvine Office
  • On April 27, 2011, the California Court of Appeal’s decision in Nortel Networks Inc. v. State Board of Equalization became final. This significant decision held that the license of software transferred on tangible storage media constitutes a “technology transfer agreement” (“TTA”)—and thus is at least partially exempt from California sales and use tax—if the software is subject to a copyright or patent interest. The court’s exempt TTA holding extends to licenses of prewritten or “canned” software transferred on tangible storage media, shattering the long-standing position of the State Board of Equalization (“SBE”) that the entire “gross receipts” or “selling price” from sales of such software is subject to tax.