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News & Press: Colorado Technology Industry

Boulder's quest to tax software, real estate sends wrong message

Thursday, January 12, 2012   (0 Comments)
Posted by: Su Hawk
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Boulder's quest to tax software, real estate sends wrong message
By Business Report Staff

January 6, 2012 -- Two tax measures being pursued by the city of Boulder send the wrong message about the city's commitment to economic vitality.

The first such measure is an ill-advised attempt to "clarify" that the city's tax code encompasses software downloaded from the Internet.

The measure stems from a court ruling involving Ball Aerospace & Technologies Corp. A Boulder district judge ruled in August that the city's current software tax applies only to software delivered via a physical medium, such as tapes or disks.

City officials worry that not being able to tax software downloaded via the Internet would eliminate about $3 million per year in tax revenue. So they're asking for a clarification that the tax code applies to all software, no matter the medium of its delivery.

In our view, such a "clarification" would violate the state constitution. The TABOR amendment clearly requires that new taxes be presented to the public for approval.

A court has already ruled that the city's tax does not apply to software that has been downloaded. For the city to now "clarify" - retroactively - that the code does apply to such downloads is disingenuous and legally risky.

It would be, in effect, a new tax, requiring a public vote.

For the record, a new state law repeals a state-level tax on software purchases, a repeal that takes effect July 1. The state had the right idea in repealing the tax, and Boulder should take heed.

Likewise, city support for a real estate transfer tax is also a bad idea. City officials have made it a priority to lobby the state Legislature to allow communities to impose real estate transfer taxes, which currently are prohibited.

We believe that such a measure will not win legislative approval, making Boulder's push for the tax somewhat Quixotic. Battling this particular windmill means that city officials will be distracted from more-important pursuits.

Both of these tax measures portray a city that will do whatever it can to seek out new sources of revenue, even if the pursuits are unconstitutional, unwise and potentially damaging to the economy.

Wrong message indeed.

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