Idaho Administrative Code
Title IDAPA 35 - Tax Commission, State
Rule 35.01.01 - INCOME TAX ADMINISTRATIVE RULES
Section 35.01.01.551 - SALES FACTOR: SPECIAL RULES

a. A license or sale of pre-written software for purposes other than commercial reproduction (or other exploitation of the intellectual property rights) transferred on a tangible medium is treated as the sale of tangible personal property, rather than as either the license or sale of intangible property or the performance of a service. In these cases, the receipts are in this state as determined under the rules for the sale of tangible personal property set forth under Section 63-3027(12), Idaho Code, and related rules. In all other cases, the receipts from a license or sale of software are to be assigned to this state as determined otherwise under Rules 546 through 551 (e.g., depending on the facts, as the development and sale of custom software, see Rule 548.03, as a license of a marketing intangible, see Rule 549.02, as a license of a production intangible, see Rule 549.03, as a license of intangible property where the substance of the transaction resembles a sale of goods or services, see Rule 549.05, or as a sale of intangible property, see Rule 550.

a. In general. In the case of a sale or license of digital goods or services, including, among other things, the sale of various video, audio and software products or similar transactions, the receipts from the sale or license are assigned by applying the same rules as are set forth in Subsection 548.03.b.ii. or iii., as if the transaction were a service delivered to an individual or business customer or delivered through or on behalf of an individual or business customer. For purposes of the analysis, it is not relevant what the terms of the contractual relationship are or whether the sale or license might be characterized, depending upon the particular facts, as, for example, the sale or license of intangible property or the performance of a service. See Subsections 549.05 and 550.01.c.

b. Telecommunications Companies. In the case of a taxpayer that provides telecommunications or ancillary services, receipts from the sale or license of digital goods or services are assigned by applying the rules set forth in Subsection 548.03.b.ii. or iii. as if the transaction were a service delivered to an individual or business customer or delivered through or on behalf of an individual or business customer. However, in applying these rules, if the taxpayer cannot determine the state or states where a customer receives the purchased product it may reasonably approximate this location using the customer's "place of primary use" of the purchased product.