(Denver—April 8, 2011) House Majority Leader Amy Stephens (R-Monument) and Representative Carole Murray (R-Castle Rock) introduced HB 11-1293 on Wednesday to repeal Colorado’s software tax passed during last year’s legislative session, HB 1192.
Senator Cheri Jahn (D-Wheat Ridge) and Senator Linda Newell (D-Englewood) are Senate prime sponsors of the bill.
HB 1192 was enacted on March 1, 2010 and charges new taxes on software use in Colorado for all Colorado businesses. HB 1192 has added administrative costs and nightmares for all employers across the state, resulting in taxes of more than 8%, and ultimately has assessed an extra cost for companies who employ people in Colorado – and a penalty for utilizing software programs.
"We felt strongly that we needed to include this in the budget package as way to help businesses and support job growth. Colorado proudly touts its leadership in entrepreneurship and innovation, but it is quickly becoming known as a leader in the wrong space – taxation,” said Leader Stephens. "Colorado should be leading in innovation and solutions to encourage new business, not aggressive and confusing tax laws that shutter the doors for new business.”
"It is a new day for the state to join together and collectively continue to cut red tape and make it known that Colorado is open for business—that why we introduced HB 11-1293. What was intended to help the state has brought forth unintended consequences creating confusion and uncertainty for all of our businesses,” said Representative Carole Murray. ”This hurts our businesses in a significant way – they need clarity and support from the state, not confusion and chaos at these times of economic uncertainty.”
Members of CSIA-Colorado’s Technology Association and Colorado businesses strongly support HB 11-1293 and outlined issues and concerns they have faced since the enactment of the law on March 1, 2010.
Su Hawk, President of CSIA-Colorado’s Technology Association said, "The repeal of this bill is our top priority, and we thank key leadership on both sides for recognizing the negative impact this tax has had on businesses of all types across Colorado, and we are encouraged by collective actions to include this in the budget package. "
"Last year’s taxes on software use has placed red tape around the ankles of businesses across our state at a time when we need to race ahead to strengthen important businesses, jobs and our economy,” added Hawk. "We know of a number of companies who have declined to relocate to Colorado, due to this onerous tax. Businesses now think twice about hiring people in Colorado. Last year’s new taxes added administrative costs for thousands of businesses who instead need to be more efficient and competitive. Isn’t that the opposite of what we want for a stronger Colorado?”
Supporters of the repeal explain that the tax has created tension between the state and important employers –employers who are critical to the state’s economy and to communities across all regions. Businesses following the Department of Revenue’s (DOR) guidelines for HB 1192, the state’s sales and use tax of standardized software, have little direction in how to implement the law in their daily businesses, thus increasing their administrative costs.
Colorado tax expert Bill Mueldener, from Hein & Associates explained that "To date, the Department of Revenue still has no way to accurately account for revenues have been captured as a result of the law. Instead, businesses are frustrated with the added costs of interpreting the confusing language and impossible administrative requirements of the law. They are hiring additional staff to comply with the tax law; they need jobs to help them grow, not jobs to help them cut through red tape. It just does not make sense.”
"It’s critical for Colorado to be competitive, especially given all the work other states are doing to recruit companies from our state,” said Tom Melaragno, President and CEO of Denver-based Compri Consulting, an IT services company. "We have been here in Colorado for 18 years, and want to continue growing here, but the complicated tax environment makes it difficult. If we could get last year’s new taxes on software use repealed, it would show that Colorado is interested in rebuilding its economy, especially given that it impacts companies across every industry.”
Confusion about the interpretation and reporting requirements of HB 1192 puts Colorado businesses who are actually trying to abide by the law at risk. It sets businesses up for increased and burdensome administrative costs, potentially costly future audits, and complicates standard business practices for companies across all industries.