Second Regular Session Sixty-seventh General Assembly STATE OF COLORADO INTRODUCED LLS NO. R10-1036.01 Esther van Mourik SCR10-007 SENATE SPONSORSHIP Lundberg, HOUSE SPONSORSHIP (None), Senate Committees House Committees State, Veterans & Military Affairs SENATE CONCURRENT RESOLUTION 10-007 Submitting to the registered electors of the state of Colorado an amendment to article X of the constitution of the state of Colorado, concerning the imposition of sales and use tax on tangible personal property, and, in connection therewith, voiding two acts enacted by the general assembly and signed into law in 2010, codifying the department of revenue's special regulation related to the sales or use tax attributable to sales of computer software, and specifying that there shall be no sales or use tax liability for any Colorado purchases made by a Colorado purchaser from a retailer that does not have a physical presence in the state of Colorado. Resolution Summary (Note: This summary applies to this resolution as introduced and does not reflect any amendments that may be subsequently adopted. If this resolution passes third reading in the house of introduction, a resolution summary that applies to the reengrossed version of this resolution will be available at http://www.leg.state.co.us/billsummaries.) The concurrent resolution voids two acts enacted by the general assembly and signed into law in 2010, codifies the department of revenue's special regulation related to the sales or use tax attributable to sales of computer software, and specifies that there shall be no sales or use tax liability for any Colorado purchases made by a Colorado purchaser from a retailer that does not have a physical presence in the state of Colorado. Be It Resolved by the Senate of the Sixty-seventh General Assembly of the State of Colorado, the House of Representatives concurring herein: SECTION 1. At the next election at which such question may be submitted, there shall be submitted to the registered electors of the state of Colorado, for their approval or rejection, the following amendment to the constitution of the state of Colorado, to wit: Article X of the constitution of the state of Colorado is amended BY THE ADDITION OF A NEW SECTION to read: Section 22. Taxation of purchases made via the internet. (1) House Bill 10-1192, enacted in 2010 and effective March 1, 2010, is void, and all moneys paid by each taxpayer from the increase in state revenues resulting from the passage of House Bill 10-1192 shall be refunded to such taxpayer. (2) (a) Notwithstanding any other law, commencing March 1, 2010, "tangible personal property" for purposes of calculating sales or use tax liability pursuant to law shall include computer software if the computer software meets all of the following criteria: (I) The computer software is prepackaged for repeated sale or license; (II) The use of the computer software is governed by a tear-open nonnegotiable license agreement; and (III) The computer software is delivered to the customer in a tangible medium. Computer software is not delivered to the customer in a tangible medium if it is provided through an application service provider, delivered by electronic computer software delivery, or transferred by load and leave computer software delivery. (b) As used in this subsection (2), unless the context otherwise requires: (I) "Application service provider" or "ASP" means an entity that retains custody over or hosts computer software for use by third parties. Users of the computer software hosted by an ASP typically will access the computer software via the internet. The ASP may or may not own or license the computer software, but generally will own and maintain hardware and networking equipment required for the user to access the computer software. Where the ASP owns the computer software, the ASP may charge the user a license fee for the computer software or a fee for maintaining the computer software or hardware used by its customer. (II) "Computer software" means a set of coded instructions designed to cause a computer or automatic data processing equipment to perform a task. (III) "Electronic computer software delivery" means computer software transferred by remote telecommunications to the purchaser's computer, where the purchaser does not obtain possession of any tangible medium in the transaction. (IV) "Load and leave computer software delivery" means delivery of computer software to the purchaser by use of a tangible medium where the title to or possession of the tangible medium is not transferred to the purchaser and where the computer software is manually loaded by the retailer, or the retailer's representative, at the purchaser's location. (V) "Prepackaged for repeated sale or license" means computer software that is prepackaged for repeated sale or license in the same form to multiple users without modification, and is typically sold in a shrink-wrapped box. (VI) "Tangible medium" means a tape, disk, compact disc, card, or comparable physical medium. (VII) "Tear-open nonnegotiable license agreement" means a license agreement contained on or in the package, which by its terms becomes effective upon opening of the package and accepting the licensing agreement. "Tear-open nonnegotiable license agreement" does not include a written license agreement or contract signed by the licensor and the licensee. (c) The internalized instruction code that controls the basic operations, such as arithmetic and logic, of the computer causing it to execute instructions contained in system programs is an integral part of the computer and is not normally accessible or modifiable by the user. Such internalized instruction code is considered part of the hardware and considered tangible personal property that is taxable pursuant to law. The fact that the retailer does or does not charge separately for such code is immaterial. (d) If a retailer sells computer software to a Colorado purchaser that is considered tangible personal property taxable pursuant to law and the Colorado purchaser pays the retailer for a quantity of computer software licenses with the intent to distribute the computer software to any of the purchaser's locations outside of Colorado, the measure of Colorado sales tax due is the total of the license fees associated only with the licenses that are actually used in Colorado. The Colorado purchaser shall provide a written statement to the retailer attesting to the amount of the license fees associated with Colorado and with points outside of Colorado. The written statement shall relieve the retailer of any liability associated with the proration. (3) House Bill 10-1193, enacted in 2010 and effective March 1, 2010, is void, and all moneys derived from the increase in state revenues resulting from the passage of House Bill 10-1193 shall be refunded. (4) Notwithstanding any other law, commencing March 1, 2010, there shall be no sales or use tax liability for any Colorado purchases made by a Colorado purchaser from a retailer that does not have a physical presence in the state of Colorado. SECTION 2. Each elector voting at said election and desirous of voting for or against said amendment shall cast a vote as provided by law either "Yes" or "No" on the proposition: "Shall there be an amendment to article X of the constitution of the state of Colorado, concerning the imposition of sales and use tax on tangible personal property, and, in connection therewith, voiding two acts enacted by the general assembly and signed into law in 2010, codifying the department of revenue's special regulation related to the sales or use tax attributable to sales of computer software, and specifying that there shall be no sales or use tax liability for any Colorado purchases made by a Colorado purchaser from a retailer that does not have a physical presence in the state of Colorado?" SECTION 3. The votes cast for the adoption or rejection of said amendment shall be canvassed and the result determined in the manner provided by law for the canvassing of votes for representatives in Congress, and if a majority of the electors voting on the question shall have voted "Yes", the said amendment shall become a part of the state constitution.