The São Paulo State Treasury Department understands that ICMS should be charged on the sale of a “wi-fi access point”, which includes the transfer of the right to use computer programs (software) and the equipment (hardware). The understanding was published in the response to tax consultation No. 24,762, of 2021. For the company that made the consultation, ISS would be levied on the software and ICMS on the hardware.
In the consultation solution, the Treasury Department states that transactions involving only software are not subject to ICMS, according to a decision by the Federal Supreme Court (STF). However, if the software is sold together with the hardware, being an integral part of the merchandise sold, ICMS is levied on the total value of the transaction.
In the consultation, a company from Minas Gerais that manufactures typewriters, calculators and other non-electronic office equipment signed a contract to supply a wireless local area network (WLAN) solution to a customer in the State of São Paulo. The contract includes all necessary components and accessories, on-site inspection, installation, configuration, training, support and warranty services.
One of the products/services is the “wi-fi access point”, which includes software licensing for the “MR20 access point” in cloud infrastructure and hardware. For the company, software licensing is a service provision, and therefore should be subject to ISS tax. In the consultation, the company says it has doubts about the classification of the hardware but understands that ICMS should be charged. The client, in turn, says that it is a service provision accompanied by the supply of goods, which would not be subject to ICMS.
The department considered, in this case, that the items were developed by the company and that the provision of the software licensing service alone is, in fact, covered by the municipal tax jurisdiction, according to the STF decision. However, the equipment (hardware), when sold separately, will be subject to ICMS, according to the state administration.
“Wanting to tax a true merchandise circulation operation (hardware) using the ISS, just because there is software related to it, is to completely distort the distribution of tax powers determined by the Federal Constitution”, states Sefaz in the consultation solution.
Therefore, in situations where the equipment is sold together with software, the latter becomes an integral part of the equipment sold. In this case, only ICMS will be levied on the total value of the transaction in the State.