Boulder’s quest to tax software, real estate sends wrong message

Two tax measures being pursued by the city of Boulder send the wrong message about the city’s commitment to economic vitality.

The first such measure is an ill-advised attempt to “clarify” that the city’s tax code encompasses software downloaded from the Internet.

The measure stems from a court ruling involving Ball Aerospace & Technologies Corp. A Boulder district judge ruled in August that the city’s current software tax applies only to software delivered via a physical medium, such as tapes or disks.

City officials worry that not being able to tax software downloaded via the Internet would eliminate about $3 million per year in tax revenue. So they’re asking for a clarification that the tax code applies to all software, no matter the medium of its delivery.

In our view, such a “clarification” would violate the state constitution. The TABOR amendment clearly requires that new taxes be presented to the public for approval.

A court has already ruled that the city’s tax does not apply to software that has been downloaded. For the city to now “clarify” – retroactively – that the code does apply to such downloads is disingenuous and legally risky.

It would be, in effect, a new tax, requiring a public vote.

For the record, a new state law repeals a state-level tax on software purchases, a repeal that takes effect July 1. The state had the right idea in repealing the tax, and Boulder should take heed.

Likewise, city support for a real estate transfer tax is also a bad idea. City officials have made it a priority to lobby the state Legislature to allow communities to impose real estate transfer taxes, which currently are prohibited.

We believe that such a measure will not win legislative approval, making Boulder’s push for the tax somewhat Quixotic. Battling this particular windmill means that city officials will be distracted from more-important pursuits.

Both of these tax measures portray a city that will do whatever it can to seek out new sources of revenue, even if the pursuits are unconstitutional, unwise and potentially damaging to the economy.

Wrong message indeed.

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