Software Taxes
Adrian reports that Tennessee is looking to tax software as property. That’s a good way to encourage growth in technical fields. As Adrian points out, most licenses allow usage and not ownership. After you drop some big bucks on a new enterprise resource system, you’ll be comforted to know you’ll be paying taxes on it for years. I’ve known a few companies that have pulled up operations in California and moved to Nevada because the taxes on inventory were too high.
January 5th, 2006 at 1:19 pm
Free Open Source Software. Lather. Rinse. Repeat.
January 5th, 2006 at 1:21 pm
What else does Tennessee tax as property? The primary reason property taxes became the main mode of supporting local units of government is that you can’t pick up your real estate and take it across the city/school district/township/county limits for lower taxes. When they apply property taxes to movable items, they will start running into problems. To quote Homer Simpson, DOH!
Beyond that, I wonder if you can tell them to send their tax bill to Microsoft, because the licensing agreement clearly says it’s their property. You can’t resell it without their permission. You can’t move it to another computer without going to their website for a product activation code, and there’s no binding commitment to keep providing those activation codes. It sure sounds more like a lease than a sale to me, and the property owner is responsible for taxes, not the leaser. IMO, the software industry richly deserves some bad consequences from their habit of “selling” software in the same way as kitchen utensils but then claiming in the fine print that you don’t get to see until you’ve opened the package that it wasn’t really sold – but this is ridiculous!
January 5th, 2006 at 1:21 pm
Yeah, or give the software and make $$ on the service/suppor/consulting end.
January 5th, 2006 at 1:24 pm
markm, depends on the locale. There’s property tax and personal property tax in knoxville.
January 5th, 2006 at 1:25 pm
One of the most dangerous job killing business moving ideas yet. Is there anything the bureaucrats will not attempt to tax?
On another note, as usual, Metulj is completely wrong.
January 5th, 2006 at 4:18 pm
I have two businesses in Idaho. We’re supposed to list all “personal property” to the county so they can tax us on it. That includes the coffee maker, the vaccume cleaner, the staplers, the desks and chairs, and in our case, several rifles and shotguns (it was fun to list those, but it is defacto gun registration. I wonder if a clever lawyer could have that requirement thrown out). Oh, and any “capital improvements” so if we put new carpeting and paint, etc., in our industrial rental unit, we pay on-going property tax on that too. The message is – “Do not improve your business propertry or you will pay for years and years to come.”
And yes, thousands of people have moved from California to Idaho, because as bad as it is in Idaho, it’s far worse in CA.
January 5th, 2006 at 4:19 pm
What about software that resides on a server in another state?
January 5th, 2006 at 8:20 pm
The article talks about software used in business, and doesn’t mention ownership. If that’s the case, this is a use tax, not a property tax. If that’s true, free software won’t save you, not will the nature of your taking “ownership” being more akin to a license than a sale.
But while we’re on the subject: Free and Open Source Software rocks.
January 6th, 2006 at 12:57 am
And yes, thousands of people have moved from California to Idaho, because as bad as it is in Idaho, it’s far worse in CA.
And yet, people are still piling into California from other parts of the country and the world. There was recently a political fight in San Francisco where the looney left was trying to stop Home Depot from establishing a store, while HD was going the extra mile by offering up job programs and stuff like that to gain approval to build a store that was ultimately supported by the moderate left. This in addition to all the other wacky taxes, rules and regulations that are involved in doing business in San Francisco..like a county-wide higher minimum wage, high workers comp costs, etc. Makes me almost think that businesses and people make decisions on where to locate for reasons other than taxes.
January 6th, 2006 at 11:44 am
Manish:
Say it ain’t so! 🙂