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Can Big Brother tax your shareware?

technofile  by al fasoldt

Columns and commentaries in a life-long dance with technology

Simple gray rule

Can Big Brother tax your shareware? 

By Al Fasoldt

Copyright © 1991, The Syracuse Newspapers

This is a story about Big Brother. It's not a fable.

In the state where I live, Big Brother taxes a lot of things. If you buy a house, you pay a transfer tax to the state. If you buy a Pepsi, you pay a sales tax. If you get a parking ticket, you pay a fine to the city where you got the ticket and a fee to the state.

And you pay a lot of other taxes. They all go to the state capital and are used to run the government. And, of course, a lot of that money is just plain wasted.

That's not an editorial comment, by the way. It's just reality. That's the sad part of this story. It's just reality that we end up being taxed and overtaxed and taxed again, and then see a lot of that good money spent on boondoggles.

But that sort of thing can be said about a lot of states. The state where I live is different. It wants to waste money in a new way—by collecting taxes on things that are free.

Notice that I didn't say, "things that are bartered" or "things that are traded under the table."

The state—my state, and that means it's probably your state—wants to tax the stuff that comes across your telephone line when you use your computer. If you dial up a computer bulletin board system and download a software program, Big Brother's gotcha, pal. Pay up.

In other words, the state of New York wants to tax the computer software that we share with each other by modem.

Let me make something clear. When I say "wants to tax," I don't mean somebody in Foggy Bottom has commissioned a study of the subject and thinks it would be a good idea. I mean the law is on the books. Period. Made, done with.

But a law on the books is one thing. Enforcing it is something else. That's why I say the state "wants to tax" the software we get from a BBS.

Let's see what the law actually says.

Publication N-91-34 from the state Department of Taxation and Finance gives the details. As of Sept. 1 -- that's a few weeks ago, Big Brotherites—the tax department says "the sale of all prewritten software will be subject to New York state and local sales tax."

But this can't possibly cover computer programs that you get from a BBS, right?

Wrong, pal!

Here's the way the tax mavens describe it themselves, in the official publication:

"The sale of prewritten software includes any transfer of title or possession, any exchange, barter, rental, lease or license to use, including merely the right to reproduce."

Catch the phrase, "any exchange," in the sentence above? That's a big net, cast as wide as possible by the tax fishermen.


The state's explanation continues:

"The only software which will now be considered exempt is software designed or written to the specification of a specific purchaser. The medium by which the software is transferred to the purchaser has no effect on its taxability."

Read that one again, pal. It says the state doesn't care how you get the software that comes into your computer -- "the medium," as the state says, "has no effect on its taxability."


It might be helpful to back away from this and get a little perspective. The state needs money. The state already taxes a lot of transactions. The state's tax experts probably figured adding computer software was just a way of adding another category.

And they probably knew nothing about the way BBS users get their software. That's understandable, if true. Although computers are becoming very popular, many modems end up never being used; those of us who have mastered telecommunications must keep in mind that we are still practicing a mysterious art, one that others may never understand.

This way of looking at it makes sense in another way. BBS users all over New York have been complaining to the tax department, and some of the answers they've received—all unofficial, so far—indicate that the tax was never supposed to be aimed at hobbyists.

But the law is on the books. According to the law, it matters not a whit whether the software you get is free; you still pay a sales tax on it, based on somebody's idea of fair market value. (Whose idea? Flip a coin, pal.)

And because of the wording in the law, the sales tax also applies to software that you get in the mail—even if you get it free from a friend.

As I said at the beginning, this is not a fable. But it comes from the land of make-believe anyway. I'm not worried about it; it's just too outlandish to take seriously.

Nor am I setting aside a few pennies here and there to pay the sales tax on the free software I get every few days. Is that civil disobedience? No, it's nothing quite so dramatic. It's just common sense.

And that is something that's missing at the state capital.

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