Tangible or Intangible - Is That the Question - Conflict in the Texas Tax Classification System of Computer Software Comment.

This Comment evaluates tax classification of computer software in Texas under recent statutory provisions and case law. The author focuses on whether computer software constitutes tangible or intangible property and whether computer software should be taxable or not. Determining property classification is not easy—the term “computer software” is difficult to define, and the multitude of different types of computer software further obscures the formation of a uniform definition. The Texas legislature’s ability to tax both tangible and intangible property makes classifying computer software as either type unnecessary. Texas can resolve the conflict in its tax classification system, wherein computer software is both tangible and intangible property, by simply deciding whether computer software should be taxable or not. This Comment begins by outlining definitions of real, personal, tangible, and intangible property. The discussion continues with a review of the development and evolution of property taxation in the United States. Next, this Comment examines the definition and various types of computer software and then addresses the legal issues surrounding taxation of computer software. Part IV evaluates methods used to assess the value of computer software as well as problems inherent in software valuation. Part V presents the conflicting approach Texas takes in classifying computer software. Finally, Part VI proposes the Texas legislature decide not whether computer software constitutes tangible or intangible property but rather whether computer software should be taxable or not taxable. Until the legislature resolves the issues surrounding computer software’s taxability, courts will continue to entertain arguments concerning computer software and taxation