SCOWI: No Tax Due from Menasha

In a very, very, very important ruling, SCOWI agreed with Menasha Corp regarding the taxability of certain software.

The state Supreme Court ruled today that state government illegally collected sales taxes on customized computer software - a decision that could cost state government $265 million in refunds and interest it doesn't have.

...Writing for the court, Justice Annette Ziegler said the three-member Tax Appeals Commission was created as "the final authority for hearing and determination of all questions of law and fact" on taxation issues. The commission's decision in the Menasha case had been reversed by a Dane County judge.

...The case was a test of the definition of customized software under Wisconsin law. Customized software is not subject to sales tax, whereas off-the-shelf programs, such as those sold in boxes at retail outlets, are.

Exactly where to draw the line between the two categories long has been a point of contention between the state Department of Revenue and the Wisconsin business community.

The case decided Friday was seen as a test to answer that question. Specifically, it involved a companywide, multi-million dollar software package installed by the Menasha in the 1990s. Menasha, based in Neenah, is a privately held company that has sales of more than $900 million annually making packaging at plants across the United States. It spent considerable time and money modifying the software, leading it to argue that the program had been customized and was therefore tax exempt.

So?

The decision worsened the state's budget picture significantly, because future spending commitments exceed revenues by more than $800 million - before today's ruling, which could cost an additional $265 million

Now we'll see the Republicans "borrow" more from the 2009-2011 budget, because they simply will NOT reduce spending.