Comment by floxy

Comment by floxy 6 months ago

Doesn't this kind of make sense if software is an asset? If your company purchases a seat of Oracle or Solidworks or Windows 11 or whatever. I don't think you can expense that all at one time, you have to amortize over the useful life of the software, just like if it was a physical printing press or a backhoe. Similar if you were making a software program for sale or for use internally, there is the upfront costs associated with making the software, and then it gets used/sold for the next X number of years. And software never wears out, unlike a tractor; that's at least why physical goods are amortized over a finite life. Probably the biggest problem is that this conceptualization of software might be 20 years out of date.

jandrewrogers 6 months ago

The vast majority of software barely qualifies as an asset, since it has no intrinsic value. It isn’t like a tractor or a factory, which has a non-zero market-clearing price.

A one-off shell script has an asset value of zero after its single use but still counts as a long-term capital asset for tax purposes.

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chermi 6 months ago

Thanks, this is the closest thing to making sense. But it still doesn't make sense.

Like you said, this is a pretty weird characterization of software. I guess it would make sense to lawmakers who have no idea how it works. Combine that with the fact the lobbyists pushing this are 99% representing big tech and you start to get a picture of how this happens.

Warning- brain dump not directly related to topic, read at your own risk. Lol @ software never wearing out. I wonder how that works with something like Microsoft windows licenses(as opposed to something like 365 which has new "features" every year)? I'm actually asking, how do you amortize an "asset" that you are admitting only lasts a year? I know SaaS on consumer side is categorized as opex.

Does this capital-asset view of software have any effect on the attractiveness of SaaS going forward? I know we were talking about the development side of things not the consumption side, but it seems like this capital/asset perspective conflicts with the reality of how software is often sold. SaaS is partially justified as the cost of 'maintaining' the software (in addition to support and new features). The fact that maintenance is required belies the perspective that it's a capital asset. Coming full circle, this must require the vendor/developer demarcate programmer effort between feature vs. maintenance & support. If anyone has a sythensis of all of this or reference it would be appreciated

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floxy 6 months ago

>The fact that maintenance is required belies the perspective that it's a capital asset.
I'm not following this. Factories, ships, stamping presses all require lots of maintenance and up keep.

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- chermi 6 months ago
  
  You're right. I was focused on the idea that for software to be taxed as a capital investment there had to be a time when it was considered a finished product. Like building a tractor. I guess the analogy then is how the tractor builder is taxed when fulfilling warranties. I suppose tractor business can expense as R&D work that goes into processes that make it easier to fulfill warranties.
  
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  _aavaa_ 6 months ago
  
  Each version of the software is a finished product just as any particular tractor is a finished product. The difference is that I know plenty of physical assets that companies buy which see no changes other than maintenance over their entire lifetime. I don't know of a single piece of software produced which receives only bug fixes.
  Yeah devs spend their time fixing bugs, but a large percentage of those bugs are the result of the software needing to work under new conditions or with new version of dependencies.
  That fundamentally different than a tractor breaking down from wear and tear while doing the exact same thing it's always done.
  
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