Source of Income for Sales of Copyrighted Articles
A transfer of intangible property is a sale if the actual facts and circumstances support the fact that the transferor has transferred “all substantial rights” to the computer software property. A perpetual and exclusive license of intangible property is considered to be a transfer of “all substantial rights” is also treated as a sale, rather than as a license, for tax purposes. All the facts and circumstances are reviewed to determine whether the transaction transferred “all substantial rights” to the property in question.
A sale of a copyrighted article occurs if sufficient benefits and burdens of ownership have been transferred to the buyer, taking into account all facts and circumstances. This is the same test that generally is applied to determine whether transfers of tangible personal property are sales or leases.
The source of income generated by the sale or exchange of a copyrighted article often depends upon whether the sale took place within or without the United States. The Software Regulations provide that the place of sale is determined under the “title passage rule”.
The governing regulation state that “a sale of personal property is consummated at the time when and the place where, the rights, title and interest of the seller in the property are transferred to the buyer”. The sale shall be deemed to have occurred at the time and place of passage to the buyer of beneficial ownership and the risk of loss.
As to the issue of determining the place of sale under the title passage rule, the parties in many cases can agree on where title passes for sales of inventory property generally.
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