- UPDATE Feb. 1st, 3:50PM -

The bill is still going in the House, but hope is not totally lost.  Apparently the word is getting out there and the resistance is growing.  The CSIA has posted a new article on exactly why this bill is so damaging and the efforts to stop it here.

- UPDATE Jan. 28th, 2:30PM -

Bad news, HB 1192 advanced this morning, 6 voting for, 5 against.  It is scheduled to be heard before the House tomorrow.  There is still time to voice your opposition though, call or email the representatives today, you can see a list of ALL members of the house here.

The new tax regulations will mean that:

• Data centers will have to collect tax from all of its customers that had “users” with access to the SaaS system located in Colorado.
• Charges to customize “base software” could be taxable if not separately stated from the overall purchase of software.
• Taxable software would include all prewritten updates/upgrades.  If these charges are not separately stated from a maintenance fee, the full charge for maintenance and update becomes taxable.

Not to mention that this is a NEW TAX that we, the people, CANNOT VOTE ON.  This is a violation of our state constitution (the TABOR amendment).  So, this is an illegal tax that will drive jobs out of our state.

- UPDATE 3:10PM -

The measure is HB 1192 and is being lumped together with twelve other exemption/credit reversals in an effort by the governor’s office to rush this through legislation. It will be voted on Wednesday, Jan. 27th.

- Original Post -

This very week the Colorado House Appropriations Committee is going to vote on whether to levy additional taxes on software in the state of Colorado. This would make Colorado only 1 out of 11 states to enact such measures and will likely put the brakes on our state’s blossoming tech industry.

Through the CSIA and their relationship with the Governor’s office, we have learned that not only is the house committee trying to fast track the vote on the legislation (they are voting early this week!), but also that its effective date has been accelerated to March 1 instead of July 1.

To make matters worse, the committee and Governor’s office have yet to share the specific language of the bill with the public. What we know is on the table are additional taxes on electronic downloads, SaaS-sold software, custom software development, and even “IT services” (as vague as that is).

The CSIA has estimated that this will likely add an 8-10 percent tax burden to all software purchases across the state. Technology companies and professionals in Colorado already spend 1 to 2 billion dollars in taxes a year, and this new tax would only deepen that burden.

As the majority owner of a small software development company, I would like to make it clear to the house committee that if this proposal is passed, companies will flee the state. Unlike most other industries, software development can be done from anywhere in the world, and team members can collaborate across continents. Realizing this, it should also be understood that to attract software companies to your state and city, you must provide an environment that attracts them. This is indeed what has been happening across our state, even in the midst of the recession, Boulder especially.

Boulder is a hot bed of tech startups. According to a Business Week analysis, Boulder came in first in a list of “Top Small Cities for Startups”, citing 5.5 startups per 1000 inhabitants. There are a lot of small cities around this nation that would love to claim this mantle, and while the Boulder culture is well suited to the startup lifestyle and we who live in both Denver and Boulder love to live and work here, that is not powerful enough to fight the sheer economics of the situation. If I’m put into the situation where it is either move out of town or close shop on Planet Telex, I’ll be moving- and I’d wager most small companies are in the same boat.

The 5500 technology companies employing over 175,000 people in Colorado are a major reason why Colorado has only 7.5% unemployment right now as opposed to the national average of 10%. I can’t believe that those in governance want to jeopardize that right now. 2009 was a tough year for most of us, and while I’ve been optimistic about 2010, it is clear to me that the industry is still not at pre-recession levels, and many of us are still struggling. This proposal does nothing less than kicks us while we’re down. It will hurt my company, it will hurt many other small companies in Colorado, it will deter new companies from moving to Colorado, and will ultimately hurt the future development in this state.

The CSIA is working with several law firms and lobbyists to fight this new measure, but that effort needs support from the industry. To that end, I encourage anyone who will be affected by this new legislation to call or email the house committee representatives and voice their dissent. Below are phone numbers and email addresses of key people on the House Committee and the Governor’s office. Urgent action is needed; remember they might vote as early as today.

House Committee Representatives:

Governor Ritter’s office: 303-866-2471