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Tennessee to Tax Software as Property? 312

Posted by ScuttleMonkey from the pad-the-bottom-line dept.
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.'"
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Tennessee to Tax Software as Property? More

Tennessee to Tax Software as Property?

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  • Do we own it (Score:5, Insightful)

    by achew22 ( 783804 ) * on Sunday December 25, 2005 @04:49PM (#14336872) Homepage
    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?

    • Re:Do we own it (Score:5, Insightful)

      by Philip K Dickhead ( 906971 ) <folderol@fancypants.org> on Sunday December 25, 2005 @05:02PM (#14336902) Journal
      Exactly.

      They didn't really do their homework on this one, did they. How do you tax a revokeable roight-to-use as property?

      Maybe they are taxing licenses: that's rich! Maybe they can tax the right to vote, and other abstractions as well.

      • Re:Do we own it (Score:5, Informative)

        by MaggieL ( 10193 ) on Sunday December 25, 2005 @05:14PM (#14336951)
        How do you tax a revokeable roight-to-use as property?...Maybe they can tax the right to vote, and other abstractions as well.

        No more outlandish than the idea that an algorithm or a business method, or a gene sequence can be property. Of course, that's pretty outlandish.

        Heinlein fans among us will recall a passage in Stranger in a Strange Land describing a Tennessee statute setting the value of pi to be exactly 3. But Snopes tells us it was apparently the Indiana House of Representatives who unanimously passed a measure redefining the area of a circle and the value of pi.

        I have yet to see the politician who can resist a brand new source of revenue to pocket simply because "it's a bad idea" or "it makes no sense".
         

        • quite right (Score:5, Insightful)

          by Quadraginta ( 902985 ) on Sunday December 25, 2005 @05:27PM (#14336985)
          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.

    • Re:Do we own it (Score:5, Interesting)

      by thogard ( 43403 ) on Sunday December 25, 2005 @05:19PM (#14336967) Homepage
      When Microsoft owned software attacked my news server, they were claiming it wasn't their problem because it wasn't their software. I think they are going to have to take a stand on this issue at sometime.
      • not going to happen. as long as both people and the law is confused, its easyer to dodge lawsuits...
      • "When Microsoft owned software attacked my news server, they were claiming it wasn't their problem because it wasn't their software."

        You were attacked by a human that most likely does not work for MS, not the software. (Unless MSSkynet has finally come to fruition.)

    • Re:Do we own it (Score:5, Interesting)

      by keithmo ( 453716 ) on Sunday December 25, 2005 @05:30PM (#14336995) Homepage

      I leased a truck for 5 years. I had to pay property taxes on it. I tried the same "why should I pay property taxes on something I don't own" argument, but it fell on deaf ears.

      • Someone owns the vehicle, and usually part of the leasing arrangement is that the person leasing the vehicle directly pays the property tax, but make no mistake, if the lease is structured differently, you would still actually pay the property tax.
    • Ironically, the answer to "do you own it" may becoming to be yes. Historically you own the hardware and liscense the software. But with the resurregence of the propriatery platform such as the Xbox 360, the PSP, and apple commputer, they no longer care if you own or liscence the software since it only runs on their machine. So going to a software ownership model might be just fine with them. With propretary hardware and the rise of platform locked DRM they can even inhibit re-sales of the software. (no
    • Software is being milked both ways, and we should really settle on one model and work on the rules for it.
      The first way of seeing software is that software should be dealt with like a book and should follow the copy write law system where your rights to do what you want with the software is up to the author(s). The second treats it like a product which can be patented and taxed as property, where you have the rights to do whatever you want with product as long as you don't blatantly make copies and sell the

      • Re:Do we own it (Score:5, Informative)

        by PatrickThomson ( 712694 ) on Sunday December 25, 2005 @06:31PM (#14337171)
        GNU software actually followers the copyrightable method where the author(s) chooses to give up rights to his software.


        Sorry, you're wrong. I won't patronise you and explain how you're wrong, but I'd just like to say that it's innacurate simplifications like this that lead to the public mindset of GPL software as being "usable by anyone for any purpose", undermining its credibility in the public eye and leading to poorly-informed software companies infringing without realising and then trying to cover it up when they find out that 80% of the code they wrote is technically GPL.

        it's true what they say, the best way to get people to believe something is to repeat it incessantly. The GPL is by no means free code, or code that's given away. There's no monetary return, but there is a strict legal expectation of ideas flowing both ways. If you use it, one way or another, you'll pay. Of course, most of us are paying what we'd gladly share, under identical conditions.

        • Re:Do we own it (Score:4, Informative)

          by Minna Kirai ( 624281 ) on Monday December 26, 2005 @01:19AM (#14338348)
          If you use it, one way or another, you'll pay.

          False. If you just use software, and don't modify it, you never have to pay anything for GPL programs.

          All those normal people who want to use Linux (the same way they might use Windows) get it for free. The only ones who need to "pay" (in some sense) are those who wish to distributed modified versions, which isn't something you could legally do with proprietary code anyhow.

          For anyone without the ability to meaningfully edit a program, GPL is just like public domain.

  • chunk o' change! (Score:4, Interesting)

    by yagu ( 721525 ) * <yayagu@[ ]il.com ['gma' in gap]> on Sunday December 25, 2005 @04:49PM (#14336873) Journal

    From The Fine Article:

    "This would be a significant chunk of change," said Hayes Ledford, the Chattanooga Area Chamber of Commerces director of public affairs.

    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:

    The new rule would provide a uniform standard across the state

    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.

    • Re:chunk o' change! (Score:5, Informative)

      by Jah-Wren Ryel ( 80510 ) on Sunday December 25, 2005 @05:05PM (#14336915)
      From The Fine Article:

      "This would be a significant chunk of change," said Hayes Ledford, the Chattanooga Area Chamber of Commerces director of public affairs.


      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.

      You might have a point if he actually was a public official. The chamber of commerce is a business organization, not an arm of the government. Their purpose is to help each other out, which sometimes includes lobbying the state, but that does not make any of them "public officials."

      • The chamber of commerce is a business organization, not an arm of the government.

        You mean there's a difference between business interests and government interests? When did this happen and why didn't I get the memo?

        • You mean there's a difference between business interests and government interests? When did this happen and why didn't I get the memo?

          You didn't notice when Martha Stewart was convicted of not making enough political contributions? It was in all the newspapers. :)

      • "The chamber of commerce is a business organization, not an arm of the government."

        Yeah, but just try telling them that.

    • I lived near Memphis for 20+ years, until 2002. Ever since a state-run health care program named "TennCare" started in the mid-90s, state expenditures have skyrocketed and the government has been in a huge budget crunch. Some legislators have been trying to pass a state income tax for years, and each year it gets voted down. Governor Don Sundquist, a few years back, publicly pledged his support for the state income tax... and was promptly voted out.

      This is just another ploy to increase tax revenue with

      • Tennessee has a 7% tangible tax. Guess they now need an intangible tax to deal with the software issue.

      • Re:chunk o' change! (Score:3, Interesting)

        by DarkVader ( 121278 )
        Sundquist wasn't voted out, he had reached the two-term limit, and couldn't run again.

        TennCare has been cut to the bone. It was a great concept - provide health care for everyone in Tennessee who couln't afford it otherwise - and it requires money to do that. These days, people are dying because their TennCare has been stopped, and the fallback resources are inadequate.

        I support an income tax here - ideally a heavily progressive one that will not hurt the poor, and will only slightly affect the middle-inc

        • I also support spending as much on TennCare as it takes to cover everyone who can't afford traditional health insurance.

          You are certainly welcome to contribute 95% of your salary to TennCare. Oh... wait... something tells me you aren't that willing to contribute to the expense. Correct me if I'm wrong. But please hurry... I can't hold my breath very long.

          It was a great concept - provide health care for everyone in Tennessee who couln't afford it otherwise - and it requires money to do that.

          Providing

      • Ever since a state-run health care program named "TennCare" started in the mid-90s, state expenditures have skyrocketed and the government has been in a huge budget crunch
         
        Yet another example of how health care is relatively affordable until government makes it "free".

  • Silver lining? (Score:5, Insightful)

    by Red Warrior ( 637634 ) * on Sunday December 25, 2005 @04:50PM (#14336875) Homepage Journal
    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.

    • Re:Silver lining? (Score:3, Insightful)

      by pootypeople ( 212497 )
      I was actually thinking of the same thing. Since open source software costs nothing, it would have no value to tax; however, this sounds like a pretty stupid idea anyways. It would be a "pretty good chunk of change" because you'd have to consider the value of all software on each computer. I guess you could go by site licenses for bigger businesses, but a small business with 5 computers running office would all of a sudden have a few thousand dollars worth of software for personal property taxes. That's

      • Valuation (Score:4, Interesting)

        by jefu ( 53450 ) on Sunday December 25, 2005 @06:29PM (#14337168) Homepage Journal
        Should this nonsense actually go through, it is quite likely that vendors of software will lobby seriously (that is, bribe generously) (does anyone else think we need a new word for that - "lobbribe" perhaps?) for open source software to be valued at the same kind of valuation as their proprietary software.

        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.

        • Tracking individual installs in barely feasible within one organisation; either you use this to give the BSA a mandate to monitor business software installs for you (because this would give them increased regulatory power to detect piracy), and/or you take the music industry approach and make assumptrions [apra.com.au] about what individuals are doing, Ummm, let's say every PC has Windows, Office and a couple of games on it.... Naturally big companies will be able to "negotiate" favourable rates lest they leave the state
    • So, if Tennessee taxes software as property... How do they determine the market value of Open Source software?

      And, how do they determine the business use of the software? If biz software were to be taxed first thing i'd consider would be running all on web applications with the server located outside the state, and the thin clients running a browser and solitaire. Tax That.

  • Great for Open Source (Score:4, Insightful)

    by desNotes ( 900643 ) on Sunday December 25, 2005 @04:54PM (#14336884) Journal
    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.
    • This could indeed be a big event for open source.

      ...which really means services in general, which are already a growing component of IT services as a whole. Where I live services are subject to a goods and services tax and this has been applied to the OSS software I supplied to my clients.

    • Re:Great for Open Source (Score:4, Insightful)

      by Donniedarkness ( 895066 ) <Donniedarkness@g ... BSDcom minus bsd> on Sunday December 25, 2005 @06:37PM (#14337187) Homepage
      The problem is, 98% (or more) of the people in Tennessee don't even know what Open Source Software is. Hell, most don't know that they have the option of working on something other than Windows.

      I'm not trolling. I live here, and I'm being honest.

      The reason this is happening is that the state legislature doesn't even understand software. Hell, everyone has a position in the state legislature because they're related to someone (several times over).

    • Unfortunately the tax could be based on the software's perceived value to the business, and this is already happening in some counties, which use the software's category as a factor in determining its tax. Like the Canada's recording industry tax on blank media - 21 cents per CD, regardless of the CD's price/cost - it might not necessarily be tied to cost. If proprietary software lobbyists twist this perverse idea to its logical conclusion, it could turn into open source's worst nightmare. See my other co [slashdot.org]

  • But property can make someone money.... (Score:4, Insightful)

    by Scorpion265 ( 650012 ) on Sunday December 25, 2005 @04:57PM (#14336889)
    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...
    • Many forms of property can be taxed, and still not make you a profit in the end. Most cars are taxed ( in addition to a usage tax, you get taxed for owning the vehicle). I don't know of many cars that go up in value over time.

      If this was a tax on profitability, it would only go down as an income tax.
      • You're right. But all of those cases have one thing in common: there are public services necessary for you to have them.

        In the case of cars, you use the road. Taxes go towards maintenance and safety.

        In the case of homes and businesses, taxes go towards public services such as police, fire departments, and governing costs.

        What exactly do you get in exchange for having a software license? You provide all the hardware, all the software, and the cost of electricity and internet access. The government provi
        • The flaw in your argument is your presumption that you are taxed on a "thing" in order to pay for services that need to be provided in order for you to use that "thing". You aren't. Think of income tax and car/road tax. In the UK road taxes far exceed the money spent on road maintenance. By orders of magnitude.

          Taxes are ways for governments to raise money in a way the least people object to. What they spend it isn't related to what they raised it on.

          To give another example: here in the UK we pay "Nation

    • Re:But property can make someone money.... (Score:4, Insightful)

      by winwar ( 114053 ) on Sunday December 25, 2005 @05:43PM (#14337025)
      First, you can sell software.

      Second, you really think software doesn't make people money? If it didn't make people money, it wouldn't be used. After all, you can write letters on typewriters, do bookkeeping on paper, and drafting without computers. It adds value.

      Software does have value. It is property. Thus it is reasonable to tax it. One could make an argument that it is unfair NOT to tax it. After all, why should a business that uses software to produce products be taxed lower than a company that uses hardware? What is the fundamental difference between a printing press and a computer, printer and the software for instance? Furthermore, the article states that some counties ALREADY tax it. So this is not a change as much as a clarification.

      It certainly may not be easy to do. But if you can value property (land) you sure as heck can assign a value to software. The ultimate goal of the assessors office is to insure that property is valued correctly-they don't set tax rates. There may be valid reasons to exempt it-but that is for the legislature to decide.

  • What's five and one half percent of zero? (Score:3, Informative)

    by Weaselmancer ( 533834 ) on Sunday December 25, 2005 @05:00PM (#14336892)

    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.

    • I would think that taxing Free Software would be an affront to the "freedom to use, for whatever purpose seen fit" maxim most of Free Software philosophies.
    • and they will then come up with a regulation which does put a value on your free software.

      A government agency isn't going to allow someone to sidestep its authority when it comes to getting its hands on money. They will create an unlimited amount of BS to justify their theft.

      What some may see as a boon to open source could become a pox upon it as well.

  • However... (Score:2, Redundant)

    by alpinist ( 96637 )
    If Tennessee considers software property, then don't you legally own that software, the same as one would own a house or a car? Would this not fly in the face of most EULAs, where you've only purchased the right the use the software, but never actually own it?

    Anyone with legal kung-fu in the house?

    • Come on, on this issue any half decent lawyer is going to be able to have his cake and eat it too. You can be quite confident that both the EULA and the tax will be found all legal and proper as Sunday, even if the judge(s) in the case have to do a little fancy twisting and turning when they write the opinion.

      Just one example in another area would be zoning regulations or Federal land-use regulations: you think you own your property in fee simple once you buy it and clear the mortgage, and can then do what
    • So, you didn't have to pay tax on that car or house that you have a loan on? Or are leasing? I mean, after all, you don't own it, the bank does.

      Oh, you mean you DID pay taxes on it.....

  • Well... (Score:2, Funny)

    by Anonymous Coward
    Good thing there are no businesses in Tennessee.

    • Re:Well... (Score:3, Insightful)

      by TeknoHog ( 164938 )
      Except the one that makes Old no.7 Tennessee Sour Mash Whiskey :-P
    • ... why exactly is that funny? tennessee is a state in america much like the other fourty-nine ... what would lead you to believe there are no businesses here? have you been to tennessee? did you stay in a hotel, or did you just drive the 500 or-so miles of i40 that runs through it?

      we have a VERY low property tax, and no state income tax, making it an all-around cheap place to live, but what would lead you to believe that no one here owns or works at a 'business' ... in fact, those reasons are why we hav

  • Define 'software application' (Score:3, Interesting)

    by YrWrstNtmr ( 564987 ) on Sunday December 25, 2005 @05:02PM (#14336901)
    make computer software used in business subject to property taxes

    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?

  • Yet another numbskull idea (Score:5, Insightful)

    by Hypnocraze ( 145625 ) on Sunday December 25, 2005 @05:04PM (#14336910)
    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.
    • I've had occasion to travel to Tennessee on occasional business trips. From what I could see the state is certainly lacking growth opportunities. A big part of that starts with the poor spending levels in the education system, 44th per student nationally. Until Tenessee gets with the program and realizes that the state will not develop economically if its citizens don't have competitive skills businesses, except when they need cheap uneducated labor, are not going to be interested even if taxes are 0.

  • who will pay my property taxes ? (Score:4, Insightful)

    by e_AltF4 ( 247712 ) on Sunday December 25, 2005 @05:04PM (#14336914)
    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 :-)

  • Would Open Source be excluded? (Score:3, Insightful)

    by Voltageaav ( 798022 ) on Sunday December 25, 2005 @05:10PM (#14336935) Homepage
    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.

    • While that's true, isn't the value of a house or car generally determined effectively by resale value? I suppose they could tax support contracts, which do have a definable monetary value, but what's the "resale value" of something easily obtained for free?

      • While that's true, isn't the value of a house or car generally determined effectively by resale value?

        Yes, but only on open market. If your uncle wants to sell his farm to you for $1 and tells nobody else about this, it is not an open market (it's a back room deal.)

  • If this happened in 1776... (Score:3)

    by mister_llah ( 891540 ) on Sunday December 25, 2005 @05:10PM (#14336939) Homepage Journal
    We'd be seeing the Nashville Photoshop Party...

    ===

    I cannot express in words how much of a bad idea I think this is.
  • Ever other poster seems to think this may be the best thing yet to happen to open source. Let us hope so. But be wary that it depends on how the law ends up being written. It might backfire and turn into open source's worst nightmare.

    Consider that some software is already being taxed based on factors other than cost alone (from TFA):

    "Kelsie Jones... said county assessors have taken "varying approaches" in making distinctions about not only taxing software, but the kinds, as well. For example, Mr. Jo

  • What a convoluted idea. (Score:4, Insightful)

    by rolfwind ( 528248 ) on Sunday December 25, 2005 @05:25PM (#14336984)
    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/ [fairtax.org]
    • "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."

      Because that is what people want. Oh, they say they would like a flat rate but their actions dictate otherwise. You know, the people who want breaks for home ownership, being married, having kids, buying food, investing, using/not using certain things (roads, transit, parks, fuel, etc.), etc. In other words, pretty much all

      • Because that is what people want. Oh, they say they would like a flat rate but their actions dictate otherwise. You know, the people who want breaks for home ownership, being married, having kids, buying food, investing, using/not using certain things (roads, transit, parks, fuel, etc.), etc. In other words, pretty much all of us.

        If "pretty much all of us" were getting a break, it somehow isn't a break no more, is it? And a flat-rate tax (sales tax) can have breaks by having no tax on food (like in PA, whe

    • This kind of quasi-legal tax reminds me of PA's 'view' tax. A few cities actually charges taxes - not necessarily on how much your house is worth - but what kind of view it has! The closest area to me that does this is the West Shore in Harrisburg. I heard about this last year and I couldn't believe it. Those who live on the the West side pay an extra tax now (as a property tax) based on the kind of view over the river they have!

      Yes, PA is no stranger to a tax it didn't like. I wonder how long it'll be unti
    • > What about PDAs? Or mobile phones?

      They come with software... they are I presume taxed when you purchase. Further they are already property. That makes it easy.

      I'm sure you mean the software you can download to the phones, software that unless you are using pc to phone transfer isn't going to be on a physical disc. That would be harder... and that's the thing people, ordinary joes, think of software as that disc you bought in a store in a box.

  • Nobody likes taxes (on themselves) (Score:3, Informative)

    by Cior ( 31890 ) on Sunday December 25, 2005 @05:29PM (#14336990)
    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.
    • Name me any large business that does NOT use Software? ANY tax they have to pay will be passed on in price increases to the consumers. Perhaps it will only be a few cents but it'll come. One of the places it may be seen first is on your FedEx packages,since they are based in Memphis and every package (sent via FedEx in the USA) comes from Point A to Memphis then out to Point B. Imagine the software that tracks all this, what would be the value of that? It was written over many years and has multiple facets,
  • Of course this is all nothing more than government trying to figure out where to get more money from.

    Paying property tax on what you rent.....
  • 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 ha
  • If they were to try something like this, it seems the most cost effective way to do it would be at the point of sale, like a sales tax. Auditing businesses after the fact would just be too labor intensive, for questionable financial benefit.

    What they would do about enforcing this for online sales of software, I have no idea. Send threatening letters to thousands of software companies?

    And this is not even going near the issue of software ownership. They better be careful, or else somebody might get it i

    • I put a liitle circle in ma coffee up holder that I got for ma trs-80 and play recue at rigel on and charge tha local folk a dip o their moonshine or one of their raccon pups to play it. i got ma shotgun ready for that taxman tryin ta git ma moonshine for my trs80 game hoedown.
  • that constituents are property, and thereby force them to tax themselves accordingly.
  • If they go against actual cost, then commercial software is screwed.

    if they go against some abstract concept of 'value', then OSS gets the shaft as well.
  • This is yet another attempt (probably pushed from higher, larger political groups) to tax and regulate software and the Internet. As was pointed out, the problem is that businesses rarely ever actually 'own' the software unless it is written in-house. The trouble with valuating such software is multifaceted, and not worth the effort to value it for taxation in terms of net return on the process. F/OSS software is yet another issue... While people are free to use and modify such software, it is not theirs,
  • So, obviously there would be no tax due on Free software. This move may be a good thing...
  • then do I need a shotgun and a "No Tresspassing" sign?


    "Ya'll get - out - of my sourcecode, now!"
  • I hear a lot of folks saying that the gov will have an army of people assessing companys computer software...well, if I am the IT manager, I say "You arent getting to touch a PC or set foot in the data center 'till I see a fucking warrent! fourth ammendment bitches!"

  • Even if they do tax open source software ... (Score:3, Informative)

    by Skapare ( 16644 ) on Sunday December 25, 2005 @08:37PM (#14337521) Homepage

    ... 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.

  • Why they're doing this? Easy... GREED and BRIBERY (Score:3, Informative)

    by Dagmar d'Surreal ( 5939 ) on Sunday December 25, 2005 @09:41PM (#14337711) Journal
    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)

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