Does Denver Tax Software?
Yes! Denver differs from Colorado State. Denver taxes software regardless of whether or not the software is canned or custom, on disk or downloaded, Cloud-Computing SaaS or otherwise. This is often unknown until a business is audited and results in small assessments to those from the low hundreds of thousands to the multi-million dollar level on this issue. Software is also a complicated area sales and use tax. Denver has just updated their Tax Guide Topic No. 18 Data Processing to help clarify the issues.
Denver held collaborative meetings between city officials and local software industry leaders wherein concerns, misunderstandings and challenges regarding tax collection on software were addressed. The Colorado Technology Association(CTA) was instrumental in bringing the parties together.
In a post from the CTA Denver’s Chief Financial Officer, Cary Kennedy said, “While the updated tax guide does not change the city’s tax policy, it does provide a deeper understanding of the imposition of the city’s Sales and Use Tax on the purchase price or charge for data processing programs. The guide clarifies when a taxable event occurs, and it contains several new hypothetical software development examples.”
Key issues in the revised tax guide focus on the distinction between software and personal services work for hire including writing code and app development. The examples relating to the software development industry, software purchasers and those in the hotel accommodations industry really add clarity.
The Colorado Technology Association and city officials will host a town hall meeting to review the new tax guide, field questions and discuss the future of software in Denver. The meeting will take place Nov. 17 at 1:15 p.m. at the Industry center at 3000 Brighton Blvd. Denver, Colorado
Please RSVP for the meeting on the CTA website .
Click the link to view the updated City and County of Denver, Colorado Tax Guide Topic No. 18 Data Processing and other Denver Tax Guides.
What should you do?
If your company is in Denver and hasn’t been charged Denver’s Sales Tax on software invoices or self-remitted Use Tax, you’ll have to decide how best to handle the prior liability for the tax owed but not paid. Voluntary Disclosure is a good option when the amounts including tax, interest and penalties are high. Penalties are typically waived. Interest is usually not waived. The look-back period is typically limited to 3 years.
The information in this tax tip addresses issues in general and is limited in scope. Any potential results discussed may vary and circumstances may warrant more or less favorable outcomes.
It’s best to be proactive and to identify and resolve issues before an auditor contacts you. Voluntary Disclosure Agreements are no longer available once you’ve been contacted.
Remedies are often available when you’ve discovered obligations before auditors contact you. Anonymous Voluntary Disclosure is one option. Even if you are already under audit, we can often help. See our Audit Case Studies.
To learn more about how we can help with these or the following issues, please Contact us today:
- Assistance with proactive minimization of prior period sales/use tax liabilities
- Help with nexus questions and issues
- Other sales and use tax related questions
What are your priority issues and when do you want them resolved?
Please click here for more Sales Tax Tips. For additional insight on common sales tax concerns, please see the Did You Know? section of our website.
* This tip is intended to provide general information only and is not to be considered as a substitute for professional advice.