HB1192 - The Most Dangerous Bill Ever in CSIA's History
Friday, January 29, 2010
Posted by: Su Hawk
HB1192 is the most dangerous bill our organization has seen in its 16-year history because it is extraordinarily confusing, complex and costly for technology companies and technology users throughout all companies in our state.
The biggest concern is how confusing it is. We received a copy of this bill just late Friday, January 15, and have spent a 24/7 week talking with tax and legal experts; entrepreneurs and executives; and banks, renewable energy companies, medical device companies, and data centers. Most every technology professional we talk with gets it. Unfortunately, though, because there are so many bills being fast-tracked through our legislature, it means that the elected officials don't have time to really understand the consequences of this bill. They are being told it won't affect IT services, but it will. They are being told it won't affect custom software, but it will. And, they are being told that it's just about the difference between downloaded and pre-packaged software - but it isn't. Here's just a few examples of what this bill will do:
- All software that was designed for one user but then resold to a second user would become taxable.
- If a company develops software and then sells its buisness to a third party, they then would be selling "taxable software" when the busines is sold.
- Taxable software includes all prewritten updates/upgrades. If these charges are not separately stated from a maintenance fee, the full charge for maintenance and update becomes taxable.
- Charges to customize "base software" could be taxable if not separately stated from the overall purchase of the software. (Thus, businesses will need to be very careful about how they invoice customers, otherwise labor will become taxable.)
- In general, all services not separately stated from the license of software could become taxable (installation, customization, maintenance . . . )
- Where software is located or how the software is transferred to a user does not change the taxability of software. As a result, the sales tax would then apply to all ASP and SaaS models or any other form of "cloud computing."
- The language could apply to many transactions which include a software component. For example, on-line banking software provided to bank customers as part of their overall fees for banking services may become taxable. Any other fees for services where a customer has access to utilize some form of software may become taxable if the charge for services and software are not carefully segretated.
And the list continues on. It seems that every day we find another industry or use that would become taxable, and that's even more dangerous, because if we are seeing all of the potential consequences of this bill in just a week, imagine what else will be determined after the bill becomes law. And, because Colorado would become one of only 11 states to have a costly and confusing new tax law on technology, we've suddenly dropped to the bottom states for competitiveness.
Please help us in ringing the alarm about the damages HB1192 would cause. It's critical for our industry and for our state.