Website and apps developers seek change to EBR tax code

Advocate staff photo by HEATHER MCCLELLANDLogan Leger is co-founder of NewAperio, which develops smart phone apps. The business is assessed a local sales tax, even though it provides a service and not a tangible good.  The East Baton Rouge Metro Council is considering a change to the tax code that would exempt businesses like Leger's and other web site development companies excluded from the city-parish sales tax.
Advocate staff photo by HEATHER MCCLELLANDLogan Leger is co-founder of NewAperio, which develops smart phone apps. The business is assessed a local sales tax, even though it provides a service and not a tangible good. The East Baton Rouge Metro Council is considering a change to the tax code that would exempt businesses like Leger's and other web site development companies excluded from the city-parish sales tax.

Website builders and smart phone “app” developers may get a tax break under an ordinance change proposed by Metro Councilman-elect Buddy Amoroso and out-going Councilman Mike Walker.

Currently, businesses that provide customized software services, like building a website, have to charge sales tax and remit the sales tax revenue to East Baton Rouge city-parish government.

But Amoroso and Walker proposed a change to the city-parish tax code that would treat the custom software work as a service rather than a taxable good.

Amoroso, who takes office Jan. 2 replacing Walker, said city-parish laws need to catch up with the changes in technology, noting that the definition of software is being blurred.

“It’s hard to draw a line on what is a Web page and what is software,” Amoroso said. “The lines have merged.”

The change would distinguish custom software from “canned software,” Assistant Parish Attorney Joseph Scott said.

“Canned software,” such as programs like Microsoft products or “the kind of software you get at Best Buy,” would still be subject to sales tax under the change, Scott said.

Custom software would include the sale of services to develop, create or maintain a website.

Amoroso said small-business owner Logan Leger brought the issue to the council’s attention.

Leger is the CEO and co-founder of NewAperio, a small technology firm established in 2010 that develops applications — better known as apps — for smart phones, tablets like the iPad and websites like Facebook.

“Computer software is the only service-based business required to pay local sales tax,” Leger said.

Leger said his company absorbs the cost of the tax, because his clients who are paying for a service don’t expect to pay sales tax.

The cost of the sales tax has prevented his business from being able to hire another staff member, Leger said.

He also said the city-parish’s tax policy is out of line with the state’s sales tax policy.

The company, he said, is not assessed the state’s 4 percent sales tax, only the city-parish’s 2 percent sales tax.

The council is expected to vote on the change at its Jan. 9 meeting.

“Especially in the areas of these new technologies, I think it sends a signal that Baton Rouge wants to have these start-up types of companies,” Amoroso said.

Leger said the state offers great incentives for technology companies, such as a digital media tax credit, which is negated by the city-parish’s taxes.

That tax “is a major deterrent for businesses,” Leger said. “When you look at Baton Rouge, it’s one city that collects the tax but other cities in the state don’t.”

“If I’m building a business, then maybe I’m not going to go there because I don’t want to pay the city sales tax,” he said.