In a significant rebuff of the California State Board of Equalization (BOE), the California Second District Court of Appeal held that a manufacturer’s sale of software on tangible media was exempt from sales tax under the technology transfer agreement (TTA) statutes. Lucent Technologies, Inc. v. State Bd. of Equalization, No. B257808, 2015 WL 5862533. The court also upheld a $2.6 million attorneys’ fees award to the taxpayer after concluding that the BOE’s position was not “substantially justified.” The court also provided a useful framework for analyzing all bundled transactions, not just those involving TTAs.
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