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Illinois Considers Taxing Custom Software
Foobar_Zen writes "Illinois Governor Rod Blagojevich is proposing to tax custom software; he is hoping to generate $64 million.
You can read the story at burrwolff.com.
I am wondering if there any other states that currently tax for custom software? How is this going to affect Illinois? What does this do to independent application and software developers?" And what about software that adds value but itself is available without charge?
Now today, we get his quick fix plan to tax custom software! And I'm sure we'd all agree this is much better than a casino in Chicago, right? Right??
Bah! Me no like politicians.
Taft
...and who gets to define it?
The 'custom software' loophole has been around for years. For basics, any software which required substantial modification or creation was seen as good for programmer's jobs and as an extra expense to business, so it was given this loophole.
In short, Gov. Blag*&%$ is raising the cost of employing programmers in Illinois and making outsourcing much more profitable. Hope you didn't vote for the idiot.
So long and thanks for all the fish . . . !!!
I did RTFA, and I still agree that "custom software" is too vague and might be an undefinable concept.
The problem here, once again, is that the creation of software is being defined as a corporate-only or business-only activity.
Since government can't usually see beyond their corporate buddies. This could screw up all types of non-srinkwrapped software, not just OSS but freeware and shareware as well.
Why don't you embrace your slashbotness instead of living in a dreamworld?
And this would be called free trade? Just like the free trade in steel, lumber, etc that the US repects?
Even setting aside the hypocrisy of preaching free trade then not practicing it, your custom duty may be impractical: you're forgetting that a great deal of software code written in India is written by programmers employed by American companies, so how you'd levy a custom duty on, say, a product that was coded by Indian employees of a company based in California would be interesting.
"Accept that some days you are the pigeon, and some days you are the statue." - David Brent, Wernham Hogg
The relevant section is that software licensed or leased by the developer will now be taxed. Since Microsoft essentially leases their software under the Software Assurance plan, that means there will now be an extra tax burden on companies using Microsoft products. Microsoft will make sure that doesn't happen, because that will just be one more reason to switch to an OSS solution.
What, me worry?
I think part of the idea is that currently custom software is both defined and exempt from tax (unlike prepackaged retail software) and one possibility here is that they would eliminate the distinction and take their 6.25%.
This post written under Gentoo-linux with an SCO IP license.
I think you hit the nail on the head. This is like hammering another nail in the coffin of American computer engineering. It's the LAST thing our ailing computer industry needs right now. Even if it will indirectly benefit open source, I'd hate to see any contract programmer put out of business.
-73, de n1ywb
www.n1ywb.com
Maine imposes 5% tax on custom software.
From Maine Statues, Title 36, Section 1752 - Definitions
1-E. Custom computer software program. "Custom computer software program" means any computer software that is written or prepared exclusively for a particular customer. "Custom computer software program" does not include a "canned" or prewritten program that is held or exists for a general or repeated sale, lease or license, even if the program was initially developed on a custom basis or for in-house use. An existing prewritten program that has been modified to meet a particular customer's needs is a "custom computer software program" to the extent of the modification, and to the extent that the amount charged for the modification is separately stated.
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I called the Maine Revenue Service a while back and asked them how they determined the difference between a custom computer program, writing a maintenance script, making an application macro, spreadsheet formula or adding a Windows shortcut to a client's desktop -- at what point does this become taxable?
They replied: there's no one here that can tell you, and there's no one that will be here that can call you back with the answer.
So I stopped putting "custom programming" on my invoices, and all labor is now charged as "computer maintenance". IANAL, just a tech guy trying to comply, but there's just no way to.
Currently, in the state of Washington, shrink wrap software gets a sales tax, but custom does not. My old employee, TOM Software makes a complicated full-featured multi-user accounting package which pretty much requires a reseller to install it. The software is typically customized by the reseller for the end user client. TOM Software did not figure they were selling shrinkwrap, but started being taxed. They went to court, and they lost.
The court case was probably ten years ago. As I recall, they took it up to appeals court, so in this state, it is all very official. I have not read the court decision. If you are going to look it up, TOM Software was know as Northwest Source Group at the time.