Modified Canned Software Not Taxable in Alabama

Jul 15th, 2016

The Alabama Tax Tribunal ruled that sales tax did not apply to canned software that was modified to suit hospital's needs.

The hospital bought various software programs from a technology company. The technology company modified the software programs to meet the needs of the hospital.

In Alabama, canned software is taxable, but custom software is not. "Custom software" includes "programs that contain pre-existing routines, utilities, or other program components that are integrated in a unique way to the specifications of the purchaser." The Tribunal ruled that the modified canned software fit the definition of custom software, so it was not taxable.