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Wal-Mart Stores, Inc. v. City of Mobile, 696 So.2d 290

Facts

Wal-Mart sued Mobile to stop the collection of gross receipts taxes on its sales of computer software, arguing that such software is intangible personal property and thus exempt from taxation. The trial court found that computer software is tangible personal property, which led to a summary judgment in favor of Mobile. Wal-Mart based its argument on the precedent set in State v. Central Computer Servs., Inc., which classified computer software as intangible property.

Wal–Mart sued Mobile, seeking to enjoin it from collecting gross receipts taxes on sales of computer software by Wal–Mart.

Issue

Is computer software considered tangible personal property, and therefore subject to gross receipts tax, or is it intangible personal property, exempting it from such taxation?

At issue is whether computer software is intangible personal property.

Rule

The court applied the principle that computer software, as it has become more prevalent and is often sold in tangible forms, should be classified as tangible personal property for tax purposes.

The court held that: (1) computer software was tangible personal property, the sale of which was subject to gross receipts tax, overruling State v. Central Computer Servs., Inc.

Analysis

The court analyzed the evolution of legal perspectives on computer software, noting that earlier cases viewed it as intangible property. However, the court recognized a shift in understanding, particularly with the rise of 'canned' software sold in physical formats. The court concluded that the sale of software involves the transfer of a tangible medium, thus classifying it as tangible personal property subject to taxation.

This reasoning appears to underlie this Court's 1977 decision in Central Computer Servs., Inc., where the Court held that computer software was intangible property for purposes of a use tax on tangible personal property.

Conclusion

The court affirmed the trial court's summary judgment in favor of the defendants, ruling that computer software is tangible personal property and that the decision would apply prospectively only.

Based on the foregoing, we hold that the trial court properly entered the summary judgment in favor of the defendants.

Who won?

The City of Mobile and Mobile County prevailed in the case because the court determined that computer software is tangible personal property, thus allowing the collection of gross receipts taxes.

To the extent that Central Computer Servs. would dictate a different holding, it is overruled.

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