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Software Property Tax is an issue that is near and dear to our heart. In continuing with our first assessment and subsequent update from the NTC, we thought we’d also provide this article from the Tennessean (especially since you can’t find it on their site by typing in ‘Software Tax’ in their Search field… go figure)

By GETAHN WARD
Staff Writer

Published: Tuesday, 01/24/06

Citing a need for further study, state officials put a proposal to treat computer software as property that can be taxed on hold yesterday.

More than 65 people, including lawyers and lobbyists representing businesses that say they would be hurt by the rule, attended a hearing before the executive secretary of the State Board of Equalization. The board sets rules for local property assessors to follow.

“We’ll revise the rules at some point and present those to the board, but we do not have a timetable for that,” said Kelsie Jones, executive secretary.

The Tennessee Chamber of Commerce, which opposes the proposal to treat computer software as something subject to property taxes, said it would create a more than $100 million tax burden for businesses statewide.

Wayne Scharber, a vice president with the pro-business group, said the figure is based on estimates of impact on several of its large members.

“It would be detrimental to future location of industries in the state, which produce jobs,” he said.

It’s up to Jones and the staff of the Board of Equalization to form a recommendation for the board. The board will take comments for at least 30 days and study other states’ tax rules, Jones said. A revised draft would be sent to interested parties and posted online for comments before a recommendation is made.

At yesterday’s hearing, several trade groups argued against the proposal to make computer software taxable as tangible personal property. The proposal is part of a package to clarify property tax assessment rules, which were last updated in 1988.

The matter is complicated by the fact that many software packages are only licensed to and not owned by business users, and that software does not need to be physically in Tennessee to operate machinery here.

Published: Tuesday, 01/24/06