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Tennessee to Tax Software as Property?
thatkidkel writes "The Chattanooga Times Free Press is reporting that 'a state board is proposing a sweeping change to make computer software used in business subject to property taxes, a move that some business leaders contend could drive up costs and hurt job growth in Tennessee.'"
Does this mean that we (in Tennessee at least) own our software? Remember the software/game industry wanting us to beleive that we are just borrowing their code? This says their wrong! Or the tax wont go through. Either way I approve of this because it either legalizes buisnesses (or me claiming to be a buisness) to do what we want with their software (in Tennessee at least), or it will be deamed unreasonable because you don't own it. Win/Win who could loose?
Sincerely,
Andrew Allen
From The Fine Article:
That pretty much seems to say it all when public officials view taxation as "significant chunks of change", rather than the basis for sustaining government and infrastructure.
Interestingly part of the motivation for the proposed taxation is to allow for, and quoting from the article again:
So, in the interest of a uniform standard, they want to ratchet up the taxation, sounds pretty much like taxation without representation (I know, I know, home rule).
When governments start unilaterally considering these kinds of move, they may end up understanding "significant chunk of change" in a whole new context, as in significant chunk of change in the constituents' tolerance for government.
So, if Tennessee taxes software as property... How do they determine the market value of Open Source
software?
If a business had the choice of buying MS Office AND then paying taxes for the fact that they own it OR installing OpenOffice or AbiWord and paying x% of it's purchase price, that might drive a few more enterprises to at least consider the option, where it can make easy changes.
"If, therefore, any be unhappy, let him remember that he is unhappy by reason of himself alone."
~Epictetus
This could indeed be a big event for open source. If I was a small business owner in Tennessee I would definitely see a big benefit to open source (other than performance, innovation, etc.) by not having to pay additional taxes on it.
"Saying that Linux is inferior to Windows because more people use Windows is like saying that all restaurants are inferi
I really don't understand the reasoning behind this... I can understand a tax on actual physical property because one can gain equity on it, and in turn, turn a profit on a sale. You can't do this with software! How many businesses do you know sold their NT4 site liscense for a profit? Also one of the previous posters had a wonderful post about the implications for open source, how can you tax something that is free? I think that this will drive businesses away from Tennessee... Just my 2 cents anyway...
I am full of goo... black evil goo
I imagine it would be hard to tax free software, wouldn't it? This could be "Yet Another Reason"(tm) to move to open source.
Weaselmancer
rediculous.
Good thing there are no businesses in Tennessee.
Is that merely a commercial product that you paid someone for? Or is it also something as simple as a perl script (that you paid someone for), that runs some essential function on your server.
Software written in-house? Excel macros?
What about some code that resides on a server in Denver, used by a user in Chatanooga?
You know, being a TN resident, and seeing the current state of affairs jobs wise. I guess they are trying to drive even more businesses from TN. I understand their thoughts on it as a large number of folks are running businesses from their homes. Then when you couple that with the amount of money invested in a large corp network, it does become a significant chunk of change.
The problem they are going to run into is, who is going to do the audits. All these audits are going to require man power with the technical knowledge to find ALL software a company uses. So now, how much does that substantial chunk of change amount to. Not near as much as they think. A skilled workforce capable of travelling and auditing every company is going to cost as much if not more.
Lets try to wittle the number of required folks down further. Buy an auditing software system in which you will now be taxed on yet again. This sounds more like double taxation than anything else. First you pay the tax on the purchase of the software (TN does not have an income tax but does have a state sales tax,) Now you are going to have to pay an additional tax on that.
Now on to the question, what if you use an open source software package that doesn't have a cost. How are they going to tax that? Oh wait, they can't. Now who is going to scream, the closed source devs. Open source is getting preferential treatment.
This just is another reason why the US is falling behind, our educational system is nose diving. Our jails are filling up faster and faster. Could go into a huge rant on that alone, but suffice to say. I will be writing lots of letters.
My software vendor does not grant me property rights on the software i use, so i suppose i will not be the one to pay property taxes for it.
:-)
Whoever "owns" the software will have to pay the property taxes ? Fine for me - send the tax collector to Adobe, Microsoft or Oracle - they "own" my software, i am only "licensed to use" it
While you don't own the software itself, you own a licence to use the software, and it is ownership of that licence that brings economic benefit to your company.
It is the same as if you lease a car, or a building, or any other asset.
I know open source is free, but that hasn't mattered to the government in the past. Around here, they tax bsed on how much they decide something is worth, reguardless of how much you actually paid for it. I've seen cases where people have paid more in taxes for buying the car than they did for the actual car. If your grandfather sells you his farm for a dollar, they aren't going to tax you on that dollar. They'll asses the local property value and tax you based on that. So who's saying Open Source will be excluded from the tax? I didn't see that in TFA.
Someone save me from this sanity.
We'd be seeing the Nashville Photoshop Party...
===
I cannot express in words how much of a bad idea I think this is.
MoM++ - A Classic Expanded - [Master of Magic 1.5]
http://mompp.sourceforge.net/
How do you cheaply compute what software? There are so many varieties of computer software and titles and the amount you can download every day becomes bigger. And what about Open-source? Does it then become simply a hardware/computer tax? What about PDAs? Or mobile phones? It seem like any scheme would end up hiring more state employees to calculate all this crap than it would bring it. But perhaps that's the entire point.
But that's government for you - instead of making one flat rate tax (perhaps as a sales tax on consumables) to pay for themselves - they end up chiseling money from you here and there. Of course, the purpose of all this diffusion is so that you don't realize how over-taxed you are (and how overbloated the government budget is) - it gives the people have too many targets to attack. And if the taxes are hidden, even better (like gas taxes).
I'm sure the same manipulative logic goes behind surcharges on (esp. utility) bills.
http://www.fairtax.org/
Good grief, yes. See, the reason the IQ 100 lawyers have been able to keep the IQ 130+ intellectuals under control throughout history is because intellectuals always think logical consistency is some kind of restraint on the law. The lawyers probably laugh themselves sick over that naive folly.
You have to view this understanding the tax problems in Tennessee. Currently the state has basically no state income tax. When the state legislature talked about instituting one a few years ago, a large group of (apparently upper middle class) citizens went on a near riot outside the legislature.
The citizens have little trust that the state spends the money well, so they fight all tax increases. Its relatively easy to increase existing tax rates, so TN has huge regressive, sales taxes. However, these are so high now that people often cross the borders or go online buy big ticket items.
The result is the state legislature trying to push through a tax that few people feel directly affected by.
Hopefully you don't have these sorts of problems.
Several posters have noted that it does not seem reasonable to tax something that is free. But tax collectors have been getting around this for years. They assess something at what they consider a market price, then tax it. ( You want to dispute their numbers? You gotta pay a lawyer to sue them. )
For years, cars here in California were taxed accoding to purchase price. Lying about prices became rampant on used cars. The seller paid less tax to the IRS and the buyer less tax to the DMV. Now, they have assessment tables, so they can lookup the alleged market price of any car of any age. You get taxed even if the car was free
I predict that the tax collectors in TN will assess free software according to the cost of its non-free competition. So you will pay the same tax on Linux as on windows.
Politicians are smarter than you think. For example, this absurdity might just be stalking horse for a more normal tax increase. Think it through this way:
Let's suppose the TN tax board says, uh oh, the state needs more money. But citizens are going to resist an ordinary tax increase on, say, property or cars. Well, not all citizens. Only the citizens who actually own property and cars -- e.g. middle-class and above, entrepreneurs, business-owners. How can we recruit them to support such a tax?
Idea! Let's float some outrageous proposal about taxing some asset they use to generate their wealth. It needn't be a big tax, but just the idea that we're going to be poking our fingers into an area that has been blessedly free of Big Brother will make them freak. They'll think of all the new fees they'll have to pay accountants and lawyers and secretaries to figure out the right way to buy software and keep the records...
Then, in about 6 weeks, we can drop the other shoe. Or, gentlemen, we could just have an ordinary tax increase, a small one -- what say you to that? Chorus of assent, along with sighs of relief...and the tax board smiles privately. Mission accomplished!
You're talking like a lawyer, where the question of who is "paying" is some kind of subtle theological question.
Me, I think like an economist. I define the person paying as the guy who is out the cash when the dust settles, period, end of story, Khattam Shud. Doesn't matter to me who gets the tax bill or who writes the check to the government.
From that point of view, all taxes are paid by consumers and the final users of property. Doesn't matter to me who "legally" pays for them. That's just a shell game designed to fool the rubes.
Of course, there are other likely side effects as well.
Companies will hire companies in other states (without software taxation) to host their websites - imagine the tax on a big Oracle setup.
Companies will buy only one copy of (say MS Office) instead of one for each computer (this is probably enough in itself to motivate software vendors to lobby (bribe) the notion out of existence). Unless, "operational" software (OSes etc) are taxed less than "applicational" software (Office, Databases and the like.) In which case, MS will make sure that Office is considered operational software, Oracle will move most of its functionality into its own operating system and charge only a pittance for the "applicational" part, and so on.
Personally, I'd like to trace the lobbying (bribes) if this actually becomes serious.
Sorry, you are wrong. There are many Robert Cash's in America, but none of them have been elected to the US Senate. Before you just post "wrong" again please do some research, and if you still think this is real then please do tell the state Robert Cash represents and his party affiliation.
Computers allow humans to make mistakes at the fastest speeds known, with the possible exception of tequila and handguns
then do I need a shotgun and a "No Tresspassing" sign?
"Ya'll get - out - of my sourcecode, now!"
... are they going to tax it based on how many copies I have made of it? If I put MS Windows on 100 PCs legally, I have to either buy 100 copies, or get some enterprise licensing that still amounts to a discount times 100 or so, well more than the base price of one copy. Yet with many retail open source packages, I buy just one copy and can install it on those 100 PCs. And what if I downloaded it? Does that count the same as buying one copy?
What if I have one piece of software worth say $100 and use it on 2 PCs, and have another piece of software worth about the same but use it on 50 PCs? Is that going to be taxed differently? What if both are installed on all PCs? What if all software is accessible to all PCs via network file sharing?
While I have some concerns over being taxed on it (aside from the fact that I don't live in Tennessee, though this could potentially happen in other places, too), I'm actually more concerned about the impact that as-yet-unknown methods of counting will have on how computer and networks have to be managed. For example, it can be very convenient to have every program accessible from every computer on the network, but if the tax structure counts each PC the software is usable from (as opposed to is used from, which would be even harder to do), then I would be forced to make technical changes in the network structure that have no technical merits.
If I did live in Tennessee, I guess I would have to put my data center in another state.
now we need to go OSS in diesel cars
It's pretty simple to spot the cause whenever anyone in Tennessee proposes new technological legislation... It's generally corruption, pure and simple. Someone who would clearly benefit from this happening has simply been passing out the bribe money. Louisiana might be have been polled as the most corrupt state government, but Tennessee works hard at catching up with them.
If software is taxed as property, then it's going to be able to have it's value depreciated as well. This is just going to mean a tax break on software for companies who use a lot of it, particularly when it comes to software that comes from a company who tends to obsolesce their old releases with new ones every three years. This will in turn allow the consultants who originally got these companies trapped in the never-ending renewal agreements with no way to test a migration to some other platform, to convince these companies to spend more money on their software, because with the tax break Uncle Sam is picking up part of the tab.
There's another sinister side of this as well. Leased equipment is not taxed the same way, so neither would leased software. Taxing _owned_ software would give a distinct advantage to companies dealing in mere site-licences, since it would be a simple wording clarification to make these entirely equivalent to the software leasing agreements that they already are.
Let's look at some of the other telling details... The board *proposing* this change admits they do not know how much money this would bring in. Normally these guys have a very clear idea of how much money a proposed tax is going to represent--so what's the source of their interest in trying to get the money in the first place? (Bribe money. Pure and simple)
Leasing a car isn't really any different than buying a car with a balloon payment at the end of the contract. Either you arrange to cough up the other half when it's over, or you hand over the car and pay for anything you've done to the car to hurt its value outside of the lease. Software is different. It's like leasing a ballroom. You can turn around and sell your right to use the ballroom, but you don't own the ballroom. You're not even given the option to buy the ballroom. The ballroom is attached to the hotel, so the only way you're getting the ballroom is to buy the entire hotel. You don't pay property taxes on a leased ballroom do ya?
http://www.senate.gov/general/contact_information/ senators_cfm.cfm
Nope
Computers allow humans to make mistakes at the fastest speeds known, with the possible exception of tequila and handguns
I heard it was all just a plot by a group of political lobbyists hired by the enlightenment project. The future of enlightenment needed a good funding base, and while Tennessee isn't the richest state, they figured it might not be found out there...
Of course, it also has a clause for Linux installation on all the government owned desktop installations. It's going to be quite a windfall, I hear.
How do you tax a revokeable right-to-use as property?
My company has two different lawsuits against counties in a Midwest US state due to taxation issues. In both cases, the county tax assessors (two different counties) fabricated tax demands respective to real estate.
In one instance, a computer system owned and operated pursuant to a service for the city operated by our company in a city water resulted in the county taxing our company for the water tower (which was city property). After sending a registered letter notifying the county the tower wasn't company property, the incompetent assessor "clarified" that it was the personal property computer "affixed" to the tower. The assessor was presented a receipt for $450 for the embedded system purchase price, but arbitrarily decided it was worth $20,000 (the property also does not meet real estate definitions for tax purposes). This monitoring service for the city runs $35 a month - as if we intend to pay $300 a year in taxes on a PC in a water tower billed as "real estate" for $35 a month! The county appeal process also rejected our company's appeal, and specifically said "We need the tax money" as the reason for the rejection. Over a fraudulent $300 annual tax demand, we've cost them over $6,000 in legal expenses so far (which also affect us). Guess that tax money (and a whole lot more where it came from) is going to attorneys, not ineffective county budgets.
The other is a $25,000 tower we purchased that a second county decided was worth $350,000 because it has 17 old AT&T horn antennas (all of which are long decommissioned), and their auditor "figured" each antenna on a tower was worth $25,000 a year in revenue. Did they ever ask us about the antennas? Did they notice the waveguide was stripped years ago rendering them useless liabilities? Did they notice the tower was in the middle of nowhere and worthless for even cellular service? Nope. They made it up. So far, they've stalled in court on demands to substantiate their valuation basis to the point the court is now being asked to find them in violation of discovery requirements. This is our government that is ignoring the same laws we'd go to jail for violating.
The good news is that the accountants and executives at Worldcom, Global Crossing and so on also made their numbers up and they finally are being held accountable. What all of us need to do is quit putting up with fraud at any level of government. Yes, it'll cost us more to fight the taxes in the shortrun (and it takes a lot of time to get the state to investigate the criminal acts of some of these assessors), but unless we do so, they're going to keep up their practices.
My advice? Dispute your taxes every year and make them prove it. I've had more than one assessor tell me that they don't check their assessment facts until there is a dispute - If you are too lazy to dispute them and call them on their sloppy work, they're going to take you for the extra tax revenue.