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Denver tech companies are seriously considering leaving the city limits after it came to light that the city charges a tax on software purchased by companies located in the city, based on the interpretation of a 1987 tax code.
On Wednesday, representatives of the local technology community like Colorado Technology Association CEO Erik Mitisek and venture capitalist David Gold met with city officials after a handful of companies recently expressed interest in moving out of Denver because of the tax. Some companies, like TalentRiot, abandoned plans to relocate to the city.
Earlier in the week over 30 members of the local software industry met with city officials in a meeting arranged by the CTA, pushing Denver to change the antiquated code.
Under the code, the city can levy a 3.62 percent sales tax on any software services bought by Denver companies—including app and software development. The code was originally written in the days when software was bought in a box. Most cities, including San Jose and San Francisco, consider the modern interpretation of the software services to be exempt from taxes.
In a report by the Denver Post, Denver-based web and mobile application development company 303 Software was recently charged a $160,000 bill from the city for its failure to charge the tax on web and mobile app development. Other companies, such as creative marketing agency Spirit Media, also got similar bills.
SpireMedia CEO Mike Gellman said his app development company might have to relocate because of this tax. “We really are huge supporters of technology in Denver,” he told the Post “The problem is when Denver starts charging unfair taxes on software, we are really worried about how this is going to affect Denver moving forward.”
Other companies have already announced plans to leave after receiving bills for the software tax or hearing of the situation. After recently moving its headquarters to Denver from the suburb of Centennial only two weeks ago, Cloud Element, a software development start-up, is reportedly considering moving back. TalentRiot, a group of software consultants, recently decided against joining Denver’s tech community because of the tax and is looking at spaces in Boulder instead.
The mayor of Colorado Springs reportedly reached out to SpireMedia and 303Software offering space in his city - and the Colorado Springs Gazette even published an editorial in favor of sweetening the city for tech companies.
According to the Denver Business Journal, entrepreneur Mike Boselli urged the city during the meeting on Tuesday to change its policy before any more companies packed up and left. “Please take off the government hat, drop the attitude of moving slowly and do something about this,” he said.
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