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We developed a software which was worth $600,000, including the time spent and technology used for this software. Do I have to pay property tax on this software since it is considered as company property? Are there any other taxes I should be concerned a


Expert Matthew Peterson's Answer:

In answering this question it is very important to realize that the taxation of property used and owned by a business varies among the 50 states and it is recommended to ask BIDaWIZ or research the policies of your particular state on your own before acting on the following generality.

In general, custom software or capitalized development costs (FASB 86) are not taxable for business property taxation because the assessable value of the software is undeterminable by the taxing authority (typically the county). Note, in some states, this class of property is regarded as intagible and would stil be taxed but at a different rate than the tangible property class.

Sales and Use tax on custom software or capitalized development costs - in general, these costs are regarded as services to the original owner, not sales, and would therefore be exempt from sales and use tax assessments. However, if the property was later sold to a secondary buyer, sales and use tax would be collectible by the state upon the sale of the property.

Matthew Peterson, CPA


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