First off, I think we should bring in most tax revenues through a progressive income tax and limit sales tax to cases where we want to reduce consumption (cigarette taxes) or the tax goes to direct use of the good (gasoline tax). Second, if we are going to have sales taxes (and we are), then I don’t think anyone should get a free ride – so I support the concept of taxing software sales.
With that said, this impacts me personally as my company sells software. I’m not concerned with adding a tax to the sale as our customers are not price sensitive. What I am concerned with is the hassle as I don’t want to have to have employees spend a ton of time administering this, and I don’t want to force out customers to spend a lot of time telling us where they are using the software we sell them. We are all very hassle sensitive.
Under the proposed software sales tax, can the state tell me how to tax the sale? The following are all real cases that my company has seen, either selling or buying software.
Before making this law, you need to have clear answers for the above. We have sales prices on the order of 50K – 250K so the Department of Revenue is going to want any money due to it. But if the above questions do not have a clear answer, we will be left waiting in most (not some – most) cases to have DoR determine what is owed to who.
The other thing is I see this creating a barrier to closing a sale – and that will harm us (and other Colorado companies). If we tell a potential customer they need to break out their purchase and identify which components will first be used in Colorado and where – that’s the kind of requirement that will always slow a sale. And will sometimes lose one. (Needless to say, if we lose a 250K deal, that’s one less person we hire.)
On top of that, we have to determine what taxing districts within the state a given sale falls in. How do we determine if a Boulder address is within the city limits? In addition, this guarantees we will not open a sales office in DTC (something we have considered) because the last thing we need is a second jurisdiction we have to figure out local taxes for.
Keep in mind we’re a small company. There are literally thousands of others like us here in Colorado. We are all coming out of the recession and trying to focus all of our time and effort and growing our companies (and that adds jobs). You need to give as a simple straightforward way to determine the correct sales tax.
And to double down on this clusterfuck, there is the proposal to require companies in other states to report to Colorado based on sales. Can Colorado even tell them the criteria to determine what is included? (I bought a book on my Kindle when I was in Arizona, read it in Arizona, and deleted it when done – still in Arizona. The book was never on my system in Colorado. How can Amazon track that?) Senator Brophy has a good post on this – including the little issue of the state learning what you are buying (that inflatable sheep was a gag gift – I swear!).
I understand the need to increase revenues. I agree that it is fair for software companies to pay their fair share. But software is not buying a physical thing at a physical location. It is the purchase of an amorphous object that can then first be used in multiple locations.
The legislature needs to get this figured out before dumping it on us. Otherwise it will cost Colorado companies sales (and jobs).
first published at Sales tax on software
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This is state sales tax only. It doesn’t matter what county you’re in. And you probably already have to collect sales tax because you have business operations in the state.
You should read the bill. All of your questions are answered in the bill. I think you are making a mountain out of a molehill.
Apple might not have to worry about which City if they don’t have facilities in the state. But we do. If someone purchases from us in Boulder we have to collect City, County, RTD, & State taxes.
Up till now we have not had to because there is the federal law saying no collection of sales tax on Internet only sales and the state moratorium on software sales tax.
You only have to blame the 39 Democrat House members, your Governor, your 21 Democrat state senators, and that hook-nosed big government babblefish barbara hedges.
Where was your boy Hickenlooper?
Oh yeah, Hickenlooper was in DC for a lobbyist fueled fundraiser and conference call to the mining association. What did he tell the miners …. oh yeah …. that problem with the severance tax increase wasn’t the increase but the unpleasant nature of the cramdown on ONG.
Well, how unpleasant of a cramdown on your industry is this?
Cheers.
I think the tax is fair. I just want to make sure they make it clear when it is to be levied.
More creepy than usual, Libertad.
to turn reasonable concerns into something creepy.
Libertad: unintentionally anti-Semitic.
I was just going on my theory that Libs is more stupid than hateful. Maybe he didn’t know he was being anti-Semitic but doesn’t care. He can be equal amounts of both stupid and hateful. It’s not that big of a stretch now that I think about it.
The Colorado bill was modeled on the New York law that’s been in effect for two years. I haven’t heard of any implosions caused by their law. This is not uncharted territory.
Then I won’t worry (much). But the more I’ve dug in to this, the more the above items concern me.
Keep in mind that most of the above situations are somewhat new. And a lot of software is delivered to a physical location to be used at that location (Windows, Office, etc.)
But for companies similar to ours, this brings up new issues.
1) Passing 12 radical (bad tax policy) tax increases with midnite legislative hearings is so corrupt. We can’t expose that.
2) Colorado is #3 in local government taxes and our property taxes rank like 40th. Hummmm….now your part of the tax raisin’ party how does it feel for your employees and customers?
3) Democrats have cut $2 Billion from the state budget, yet added 2,700 or 4,400 new state employees.
Hope you like the Change.
You get the form at CONSUMER USE TAX RETURN AND INSTRUCTIONS
You need to find out if you are in the RTD .010 (Regional Transportation District), CD .001 (Scientific and Cultural District), and/or FD .001 (Football District). You can find your tax rate for your address by contacting any of the companies at Local Taxes by Address (I think you have to pay for the info).
You also need to file for your local City, or County if you do not live in a City. You can get a list of City links at Colorado Municipal League. On the City of Boulder site they say you must pay the Use Tax, but don’t tell how. I have a question in.
I’ve also asked the DoR for clarification on the above items.
So anyways, as this has been a requirment forever – has everyone here been doing their civic duty and paying this every year?
Brophy reposts David’s above diary in its entirety on his own blog, introducing it like this:
Then Brophy posts the response he says he e-mailed to David:
http://senatorbrophy.blogspot….
I couldn’t stop laughing.
Don’t give them any traffic! Shield thine eyes!