FINAL BILL REPORT

SSB 6859

                              C 255 L 90

BYSenate Committee on Ways & Means (originally sponsored by Senators McDonald, Gaspard, Hayner, Vognild, Bluechel, Sellar, Warnke, Saling, Owen, Cantu, Amondson, Johnson, Moore, Newhouse, Smith, Bauer and Sutherland)

Clarifying the tax status of computer software.

Senate Committee on Ways & Means

House Committe on Revenue

SYNOPSIS AS ENACTED

BACKGROUND:

All property, both real and personal, is subject to property taxation unless specifically exempted.  Personal property is defined to include all goods, chattels, stocks, estates or moneys and all property of whatever kind, name, nature and description which the law may define or the courts declare to be personal property for purposes of taxation.  This includes both tangible and intangible property.

Tangible property are things having a physical existence such as desks, file cabinets, and equipment.  Intangible property are things not having a physical existence, such as copyrights and patents.  Current law exempts some intangible property, including money, mortgages, certificates of deposit, and judgments.

While acknowledging that courts in nearly all states considering the subject have held computer software to be intangible, the State Board of Tax Appeals ruled in 1989 that computer software was taxable because it did not fall within the list of exempted intangibles.

SUMMARY:

For 1991 taxes, county assessors are directed to list and assess computer software in the same manner and to the same extent as they did in 1989.

The Department of Revenue is directed to study the taxation of computer software with an emphasis on policy implications involved with developing clear definitions of software that should be taxable and software that should be exempt.

To perform the study, the department is required to form a committee with balanced representation from different segments of government and industry.

The Department of Revenue is directed to report the findings of the committee to the legislative committees on revenue by November 30, 1990.

VOTES ON FINAL PASSAGE:

     Senate   45    0

     House 94  0 (House amended)

     Senate   43    0 (Senate concurred)

EFFECTIVE:March 28, 1990