Software Ruled Taxable in Alabama, Whether Canned or Custom

The sale of computer software in Alabama is taxable, whether it’s off-the-shelf or customized software, the Alabama Supreme Court ruled May 17.

But lingering uncertainty about what constitutes a taxable software sale versus a nontaxable service deserves clarification by the state Legislature, justices wrote in a pair of concurring opinions.

In a split decision, the court’s majority ruled against an Alabama hospital system—Russell County Community Hospital LLC—that sought a refund of $18,000 in sales tax paid for software installed between February 2012 and October 2014 by Medhost of Tennessee Inc.

The hospital system argued for the refund based ...