Suzy Ageton George Karakehian KC Becker Tim ... - City of Boulder

Key Issue Identification
Whether council wishes to continue taxing computer software and access to online
databases.
STAFF RECOMMENDATION
Suggested Motion Language:
Staff requests council consideration of this matter and action in the form of the
following motion: Motion to introduce, complete first reading, and order
published by title only an ordinance amending Title 3, “Revenue And Taxation,”
B.R.C. 1981, to clarify the definition of “Taxable Services” with respect to
downloaded software and on-line data bases.
COMMUNITY SUSTAINABILITY ASSESSMENTS AND IMPACTS
• Economic – Passing this ordinance would not result in any new revenue to the
city, but would avoid the loss of at least $ 2.9 million.
• Environmental – Passing this ordinance could have a minimal adverse
environmental effect if by taxing only software acquired on disk, purchasers were
encouraged to buy software over the internet and avoid the use of disposable
packaging. Staff believes that most buyers have or will switch to downloaded
software for reasons independent of the tax.
• Social – None.
OTHER IMPACTS
• Fiscal – Failure to pass the amendment would result in the loss of tax revenue.
• Staff time – No additional staff time would be necessary to implement the
amended ordinance if passed.
BOARD AND COMMISSION FEEDBACK
Not Applicable.
PUBLIC FEEDBACK
None.
BACKGROUND
In 2009, the city audited Ball Aerospace for the period between January 1, 2006 and
January 1, 2009. The city issued an assessment for $426,067.19, which was later
reduced to $422,790.59 after review of protests from Ball Aerospace. Ball Aerospace
appealed the revised assessment to the state district court. The primary ground for appeal
was Ball’s claim that the city’s sales and use tax ordinance should apply only to software
that is purchased in a physical form and not to software downloaded from the internet.
K:\FIAD\First Read Agenda memo Software Ord.-.doc
Agenda Item 3M Page 2