Information Release

PP 2004-01 - Taxation of Software - February 14, 2004  

This information release addresses the taxability of software for personal property tax purposes for both general business taxpayers and public utilities. Based on prior case law at the Board of Tax Appeals (BTA) and the stated position of this Department (ODT) in the past, prewritten computer software and the customization costs for software that operates other personal property is taxable and will be picked up on audit if it was not included on the tax return. On audit, ODT is not at the present time picking up the customization costs for software used in non-core business functions. In other words, that type of customization costs will not be picked up as being part of the taxable personal property tax base.

There are several cases pending at the BTA involving computer software regarding whether certain computer software costs are considered part of the taxable personal property tax base. In this litigation, ODT is taking the position that all computer software (prewritten computer software and all customization costs) are part of the taxable personal property tax base. If the ultimate result of pending litigation is that all software is deemed to be part of the taxable personal property tax base, including software related to non-core business activities, ODT will alter its policy in the tax year immediately following the decision and assess all software on a prospective basis. This position was also stated at the recent Ohio Tax Conference held in Columbus

If you should need further information on this matter, please call the Personal Property Tax Division at (614) 466-3280.