The Colorado Court of Appeals issued its opinion in Ball Aerospace & Technologies Corp. v. City of Boulder on September 13, 2012.
Use Tax—Downloaded Software—Online Data Services.
In this use tax assessment dispute, the City of Boulder (City) appealed the trial court’s summary judgment for plaintiff, Ball Aerospace & Technologies Corporation (Ball), reversing a hearing officer’s determination that Ball owed use tax on its acquisition of downloaded computer software and access to online data services. The judgment was reversed and the case was remanded.
The City conducted an audit of Ball and assessed use tax on both downloaded software and online data services. Ball paid the amount owing under the assessment, but protested the City’s application of its use tax to these items. The hearing officer upheld the assessment as to the downloaded software and online data services, and the trial court reversed that decision.
The City argued that the trial court misconstrued the City Code and erred in concluding that neither the downloaded software nor the online data services are subject to City’s use tax. Use tax is levied on the privilege of storing, using, or consuming tangible personal property purchased at retail. The City Code defines “use” as “the exercise, for any length of time, by any person within the City of any right, power, dominion, or control over . . . taxable services when leased or purchased at retail from any person inside or outside the City.” By its plain language the City Code levies the use tax on computer software (1) leased or purchased at retail; (2) contained on an enumerated form or other machine-readable or human-readable form; and (3) over which the buyer has any right, power, dominion, or control. Further, the City Code does not require the transfer of ownership before the use of software is taxable. By paying to access the online data services, Ball purchased the right to use, from a remote location, the computer software contained on the service providers’ servers; therefore, the trial court erred in holding that downloaded software and remote access to the online service providers’ software are not taxable use of computer software under the City Code.
Summary and full case available here.