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.