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10% Tax On Custom Software, $100M Tax Cut For Microsoft
reifman writes "Last week, the Washington State House of Representatives passed a bill which would impose a 10% tax on custom software while all but eliminating a $100 million yearly tax obligation that some say Microsoft is wrongfully avoiding by routing large chunks of business through an office in Nevada. 'I believe we've got an issue of justice and fairness here,' said Rep. Maralyn Chase. 'Most of the custom software purveyors are small businesses. It's a question for me of how we fairly distribute the tax burden.' 'It means that a 5 person team of entrepreneurs building a cool custom software suite, or a group of system integrators, would face a 10% tax on their services while keeping the exact same project in-house would not be taxed,' wrote Rep. Reuven Carlyle. 'It would be a massive blow to the entrepreneurial community in our state.' The bill won't become law until the House and Senate work out how best to raise another $300 million in taxes. A sales tax increase on consumers is also being considered."
This is clearly is bad for the individual geek who makes their living selling simple custom programs that do only what the user wants/needs and nothing that they don't, unlike Microsoft omnibus packages. It's a case of government by large corporation over the individual if this passes.
I propose a 20% tax on people who pass stupid laws!
At first I thought ... "that doesn't affect me, I run Linux" ...
But what about paying a developer to work on a FOSS application? Would that be taxed? It is custom software, after all.
The sales tax is a very regressive tax. Why should ordinary people of Washington take the hit disproportionately so that Microsoft can be let off the hook for what is basically equivalent to offshoring?
Andrew Stack would be upset, again.
This is exactly the shit that drove the man to his wits end, leaving the IRS with an airplane in their offices.
Time to write my representative, AGAIN. (Crazy week in WA., what with our rogue AG and all...)
This is like taxing grocers and restaurants while giving incentives to out-of-state food processors and big-box ultramarkets to bring in more processed pseudo-food.
What, exactly, is the message the legislators are trying to send here? "Tax local, buy global?"
Welcome to the Panopticon. Used to be a prison, now it's your home.
first cut should always be to government offices furniture budgets, then look at the "perks" elected officials get and cut those
arent you already taxing the income that is generated as a result of that software ? and applying any kind of sales tax to the software, if there is a sales tax in the state ?
Read radical news here
I have no idea what the Legislature means by "custom software" (and didn't see a definition in the article) but I'm guessing that it would be software written for a specific niche or client - in which case, Microsoft would really be the *least* likely to fall under that definition. Word, Excel, etc. are hardly "custom applications."
And if they are, well, that means just about all the software ever written would be "custom software."
You obviously have not heard of the "The law, known as Section 1706 of the 1986 Tax Reform Act", this makes it extremely difficult for programmers to work as self-employed individuals. So, for the average individual geek, you can't actually make a living as a professional programmer, this is just another attack on out profession to make us minions of corporations.
Can someone define "custom software" first?! Isn't any arrangement of 1s and 0s made to someone's specifications considered "custom"?! Maybe I'm just dull and naive.
Or do they mean software that is pumped out by the thousands, like MS Windows.
The magical number is: 09 F9 11 02 9D 74 E3 5B D8 41 56 C5 63 56 88 C0
Or, they could be honest and raise the money though an old-fashioned income tax, or sales tax. But I'm sure they'd rather hide the tax burden from the people who are ultimately paying it. Gotta love the government.
I for one salute our freely elected overlords!
Fortunately my little corporation isn't in Washington. I know first hand that there are many states more conducive to small business. Unless there is some specific reason for remaining there, it isn't be too hard to move. 10% is no small increase, so it's definitely worth looking into a change of locale.
I don't suppose anyone in the WA government considered reducing expenditures enough to make up the difference. Too radical a concept I guess.
Any regulation that is invariably put in place to "Soak the Rich Big Businesses" will inevitably turn around and screw the medium to small business. Why is this?
Example:
Microsoft is big enough to hire as many tax lawyers and other attorneys as needed to deal with any sort of regulation that the federal government tries to impose ont hem.
Meanwhile Bob T. McProgrammer is writing a piece of custom software and he gets screwed because he had no idea he had to fill out forms 1342-GOV and 1040-SCREW-U Schedule G when he sold it to someone. The IRS arrives and takes everything that Bob T Programmer ever made and he ends up disillusioned and has to work for Microsoft for 1/2 as much money he was making as an independant programmer.
The MS Lawyers squeal with glee as more regulations from D.C. will keep them employed at MS for years and decades to come and they saved money not having to buy up Bob T. McProgrammer's company and instead can hire him for a song and tell him to write the same sort of software....
Tsukasa: All I really want, is to be left alone...
Washington state representative suffers from BSOD, requires reboot.
Nullius in verba
You're obviously surfing the net instead of working right now! Pot, kettle, stop calling each other "black"!
I've abandoned my search for truth; now I'm just looking for some useful delusions.
It means that a 5 person team of entrepreneurs building a cool custom software suite, or a group of system integrators, would face a 10% tax on their services
Maybe they could move their sales office to Nevada too?
WTF is 'Custom Software'??? What are the definitive characteristics of Custom Software and non-Custom Software?
This is totally bogus, and a blatant demonstration of the ability of business to pervert political processes.
Software is software. I don't know why or how they even feel validated in taxing software at all, aside from a sales tax, let alone specifically discriminating certain software and alleviating tax burden on other software.
It looks like some people need a talking to.
Microsoft still has it's employees in Washington, pays them income, and is taxed on that income. It is also taxed on the property it owns in the state. They are paying their fair share of the taxes needed to maintain the public services in the area. Washington is being a bunch of greedy fucks, trying to get the entire world to pay sales tax on products created in the state. In other words they have have created what amounts to a state export tariff, which is unconstitutional.
Is Senator Margarita Prentice. According to her bio, she is a member of:
"American Civil Liberties Union; Amnesty International; Democratic National Committee; First Vice President, Washington State Nurses Association, 1968-1972; Labor Officer, Washington State Nurses Association, 1974-1978; Sierra Club; Renton Historical Society; Audubon Society; Humane Society of United States."
http://www.senatedemocrats.wa.gov/senators/Prentice/biography.htm
"The average reporter we talk to is 27 years old......They literally know nothing." - Ben Rhodes
a case of the good of the many outweighing the good of the few
The problem is that rewarding quantity undermines healthy competition.
Custom software has to be one of the cleanest, safest, crime-free, low impact industries in the state. You have industries with MASSIVE infrastructure burdens like: Trucking, Logging, Mining/Cement generation, farming. Industries that require inspectors or police protection or heavy truck support, water projects, and electrical projects. These industries cost the state big money to support. Or look for industries that create expensive side-effects like pollution.
Just try to zero the bubble: the industries that take the most out of the state in terms of infrastructure costs and natural resources should have to pay taxes so that their cost to the state becomes zero. But the low-impact industries, ones that cost the state little or no money to support, should not have to have special taxes directed at them.
And this will be even more true next year as many in the custom software field leave the state and/or stop doing business there.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
That only works if you consider every programmer who isn't employed by Microsoft to be in competition with Microsoft.
A more effective rebuttal would be to take the position that it is the job of the government to help the little guys against the big guys. Whether doing so with taxes is healthy is an entirely different debate.
Corporations have the same rights as citizens, so they should pay the same tax rate at the Federal and state levels.
Precisely. I should be laid off. You could cut 75% of government workers and not notice any reduction in work output.
"I disapprove of what you say, but I will defend to the death your right to say it." - historian Evelyn Beatrice Hall
Lie. Corporations do not have the same rights as citizens. Also, the money is taxed anyway - at some point a person gets it. The money a person doesn't get goes into making jobs, doing research, expanding the corporation, etc...
Whining about "corporate taxes" is just something dumb hippies do.
Minor correction: the IRS didn't really wind up with "...an airplane in their offices."
I haven't been in the building but I have received a report from one of the members of the disaster recovery team onsite. Per that report, Stack came within 10 feet of killing 20 to 50 people, perhaps many more.
His plane center-punched a main support column on the exterior of the building, taking it out and causing most of his plane and fuel to spew out at about 90 degrees from the impact. That's why there was such a wide area (there was fuel and fire almost the entire width of the building on the side he struck) that immediately showed damage and fire. The plane and extra fuel aboard, for the most part, didn't penetrate the building.
If he had been 10 feet to the left or right, nearly the entire plane would have plowed into the interior office space. The death toll would have been huge.
What they are saying is: "We know who pays our re-election campaigns to get the voter with an attention span of a 3 seconds and who will vote for us anyway as long as we shout TAX-CUTS right before the election."
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
You might not realize this but everything you've listed is already taxed into the ground. Why do you think commodity prices keep going up, hint, it's not just because of fuel.
Om, nomnomnom...
The talking heads on the news just think he's a loon.
MAYBE it's the wackos trying to screw the little guy in favor of giant, lawyer-heavy, lobby-weilding, under-table dealing faceless mega-corps. And then the wackos that passed the crippling legislation that screws people and forces them to do something drastic, then pass more legislation to make sure they know where everyone's plane is.
I see a new Yakov Smirnoff internet meme... "In oppressive America, XXXXXXX screws you!"
If telephones are outlawed, then only outlaws will have telephones.
When you make income there are two things you can do with it - spend it or save it. Rich people spend a much smaller percentage of their income, as they save and invest more. Therefore, a smaller percentage of their income is taxed by a general sales tax than a poor people. That is the definition of a regressive tax - one where poor people have to pay a greater proportion of their income than rich.
That said, you can design sales taxes to make them either proportional or progressive, if you tax different items at different rates. Washington already exempts items such as groceries from sales tax, so unless the proposed sales tax hike changes that, I wouldn't assume that it must be regressive.
People then spend too much time figuring out how to be the tax and not on how to write Great Software.
if that 10th programmer wasn't pulling his weight, then why was he still employed?
Is repairing infected OS and apps using third party tools at the computer fixit shop a matter of customization? Scenario: The PC owner comes in with the borked machine, it has a state of software level. The tech uses his antivirus and search and destroy stuff and skillz, and customizes the software on the customer's drive, to get it back to a functional level. Perhaps they also add a couple new features, like FF and OO.
With that said, the malware/botnet authors and maintainers could be charged with tax evasion in addition to any other crimes, by customizing software. heh.
Sorry, that isn't a fact. All taxies levied against corporations come out of: customers, employees, or profits. What the proportion is depends on various kinds of price elasticity. Your statement only works if levels of profit are somehow fixed and unmovable, which is clearly not the case.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
I don't think that was the original AC's point, honestly. The point is that big companies with lots of spending power, "leaving your state" power, and lobbyists frequently get what they want, no matter which business or state they're in.
[b.belong('us') for b in bases if b.owner() == 'you']
"The talking heads on the news just think he's a loon."
Being a loon and a hero are not mutually exclusive. There being no hope for peaceful change, those with nothing to lose can act...and lose nothing.
People cooperate socially and obey laws expecting a fair return. Remove their stake in society and they have no reason to care about preserving it.
"This post is an artistic work of fiction and falsehood. Only a fool would take anything posted here as fact."
It seems to place a 10% tax on the transfer of ownership or licensing of custom software. I looked through the bill and couldn't determine if FOSS development was included or not, since typically no ownership is licensed for a fee, and merely a service is offered.
My reading if the bill is that FOSS development is still exempt, but I may be missing something since the bill is a bit over 100 pages.
Basically if you pay me to do development you pay me to do the development in-house and release to the public free of charge. This isn't a sale of custom software as it is typically considered. I am sure our elected idiots in Olympia will find some way to close this exception though.
LedgerSMB: Open source Accounting/ERP
This is among the more ridiculous taxes I have ever heard of. If it completely unjustifiable. It is an assault on small entrepreneurs and against the American Dream itself. A tax on "custom software"? How is custom defined? Is Linux "Custom Software" since it is quite often built by requests of others? Who else but Microsoft could have been awarded this law?
On the other hand, Microsoft regularly has programming teams that make changes to their programs for other big businesses and they get paid a lot of money for it. Will they then have to pay this tax?
Anyone else spot the obvious source of part of that shortfall?
...all but eliminating a $100 million yearly tax obligation...
...work out how best to raise another $300 million in taxes.
Washinton State's problem is that they don't have an income tax. If they had one, then Microsoft activity in the state would naturally pay its fair share, as part of the income tax of its employees.
Microsoft's bugs have cost society plenty. Even at a penny per big they can raise 300 million easy.
Cut 300 million dollars worth of government workers.
Done.
"I disapprove of what you say, but I will defend to the death your right to say it." - historian Evelyn Beatrice Hall
People cooperate socially and obey laws expecting a fair return.
What it boils down to is essentially, to what degree is your government *serving* you, or to what degree is your government just *plundering* you. Some may disagree but personally I think we crossed the line into plundering a long time ago. And then really, what are our options? Rulers have plundered the ruled since time immemorial; sometimes people do something about it, mostly they don't.
Perhaps, but then again, in an industry with static pricing, the only thing you have left to maintain profit margins is to "improve productivity", aka fire people. And, if any CEO reduces margin when he had the opportunity to either fire people or raise prices, he's just signed his own resignation.
Unless we are to start establishing mandatory profit margin caps per industry, perhaps via some sort of government profit oversight board? With that, you'll find capital goes to those businesses the government deems worthy of investment (high margins) and flees businesses that don't. OR, the government caps profit margins (say, 5% for all businesses) and watch capital flee _any_ risk investment (such as, say, startups or 'creative'-based enterprises).
That will end well.