The Colorado Court of Appeals issued an opinion interpreting the City of Boulder’s software definition very broadly to impose use tax on downloaded software and, even more problematically, access to an online data service.
The Colorado Court of Appeals issued an opinion interpreting the City of Boulder’s software definition very broadly to impose use tax on downloaded software and, even more problematically, access to an online data service. Ball Aerospace & Techs. Corp. v. City of Boulder, Docket No. 2012 COA 153 (Colo. Ct. App. Sept. 13, 2012).
The court interpreted the language “contained on other machine readable form” to encompass software that the customer downloaded via the internet. Although this interpretation may be impermissibly broad, the court’s more curious holding was that access to an online data service constituted the transfer of software. The court reasoned that by paying to access the online data service, the company purchased the right to remotely use the computer software contained on the service providers’ servers—and acquired requisite control over the software.
This case appears to fundamentally alter the jurisdiction’s sales and use tax law. Such significant change is better handled by the legislature or formal rulemaking process, where taxpayers are afforded input and notice.
Eversheds Sutherland is an international law firm helping the Fortune 100, industry leaders, sector innovators and business entrepreneurs solve their biggest challenges and reach their business goals. Dedicated to unfaltering excellence in client service, we are known for our business savvy and industry intelligence, providing creative and custom solutions for each of our clients. Industry and business experience makes the difference for our clients.
Complete the fields below to send your briefcase via email. Separate multiple email addresses with semi-colons(;)