Tuesday, March 01, 2005

is software leased or sold?

In the Sun-Times Michael Krauss criticized Gov. B's proposal to tax software bought/leased by big business. Right now such software is exempted from sales tax because it is considered "leased".

Of course, when you buy software from Microsoft it's more like a lease than a purchase too, but consumers and small businesses do pay sales tax on their software.

Krauss pitches the idea of exempting all software from sales tax. But he's not trying to make the budget work.
Becky Carroll, spokeswoman for the governor's budget, says, "There are 45 states in the nation that have a sales tax. There's only one of those states that actually has this loophole on the books. It's Illinois. In no other state in this country with a sales tax does any business get this break."

Mark Nebergall, president of the Washington, D.C.-based Software Finance and Tax Executives Council, which represents the software industry on tax issues, disagrees. Nebergall claims he's identified "16 states that exempt software from their sales tax."
If I could get off the topic of Blagojevich for a second....

This kind of journalism pisses me off, especially from a guy who's supposed to be a specialist. Krauss presents Carroll saying one thing and Nebergall saying another and the reader is left to sort out who is telling the truth. My natural inclination is to split the difference, but both sources have a conflict-of-interest and they both could be lying. Of course, one of them could be full of shit and the other one is actually telling the truth.

Does it make sense to tax software? I'm leaning toward the Blagojevich position. The argument that it would stimulate business to exempt software applies to any tax exemption.


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