“Switch Software”Taxable or Non TaxableTHAT IS THE QUESTION?Kevin SnowDirector of Property TaxVerizon Wireless
Participants • IN THIS CORNER • KEVIN SNOW (applause, cheers!!!!!!!!!) • IN THAT CORNER • STEVE BARRECA (hiss, boo!!!!!!!!!!)
FLORIDA STATUTE • Computer Software Not Taxable Including Application & Operation Software • Exception in the Law • Permanently Embedded In Internal Memory AND • Removal of it Terminates the Operation of the Computer or Equipment
DEFINITIONS DISCUSSED • Computer Memory is accessible DIRECTLY by the CPU without going thru an input/output device • ROM • RAM • Hard Drive is a mass storage device – it is not directly accessible by the CPU • What is meant by Embedded software?
Switch - Quick History • Plug Boards • Stepping Switch • Cross Bar • Electomechanical • Electronic • Digital
First Question • What is a Telecommunications Switch Today • Definition of Digital Switch* - a computer which electronically routes digitally encoded messages through a network. Digital switches operate faster, more effectively, and with greater flexibility than analog switched. • *Benton Foundation's(The Benton Foundation works to ensure that media and telecommunications serve the public interest and enhance our democracy. We pursue this mission by seeking policy solutions that support the values of access, diversity and equity, and by demonstrating the value of media and telecommunications for improving the quality of life for all. • The Benton Foundation does not accept unsolicited grant applications or offer general grants. We are a private foundation, an institutional hybrid, bridging the worlds of philanthropy, public policy and community action. We assume diverse, crosscutting roles as nonpartisan knowledge broker, convener, public interest advocate and policy analyst. The Foundation has an endowment of approximately $10 million, the annual income from which is devoted to our own operating projects. Because of Benton's pioneering work, a number of foundations and corporations have provided additional funding)
Is The Switch A Computer • Actually a Network of Computers • Broward Circuit Court – “Autoplex 1000 consists of many different computers all connected, all serving many different purposes, but the ultimate goal being to transmit wireless telephone calls from one location to another; hence, the use of the term “switching mechanism.” • Palm Beach Circuit Court – “Verizon Wireless operates a mobile switching center in Jupiter, Florida, which contains a computer system known as the Autoplex 1000. The Autoplex 1000 consists of a network of computers and the computer software that runs on the computers.”
Verizon Wireless FL MSC’s (Network of Computers) • Main Components • 5ESS • AM – a “3B21D Computer System” • CM • SM – Motorola architecture with w Power-PC microprocessors • ECP – a 3B21 D Computer System • FMS – (Flexent Mobility Server) – Sun Netra Workstations • AP’s – (Application Processors) – Sun Netra Workstations • OMP – (Oper & Mat Platform) – Sun Netra Workstations • RNC – (Radio Network Controllers) – Sun Netra Workstations • Cisco & Juniper Routers (same as in your computer networks)
Second Question • What is meant by software • Software is a general term for the various kinds of programs used to operate computers and related devices. (techtarget) • A set of instructions that cause a computer to perform one or more tasks. The set of instructions is often called a program or, if the set is particularly large and complex, a system. Computers cannot do any useful work without instructions from software; thus a combination of software and hardware (the computer) is necessary to do any computerized work. (answers.com via Sci – tech encyclopedia) • The programs that tell the computer what to do. (esls.lib) • The programs and instruction sets that operate the computer. (m2ktech) • Instructions for a computer, organized into sets called programs. (science.unitn)
Third Question On Embedded Software • What Is Meant By Permanently Embedded In Internal Memory • FL Statute did not define • Experts – Computer Memory is ROM or RAM, programs that can be accessed directly by the CPU without the use of an IO channel • THE HARD DRIVE IS NOT INTERNAL MEMORY – IT IS A MASS STORAGE DEVICE • ROM – Permanent, programs remain even if power lost (example “boot software”) • RAM – Programs erased when power lost (examples, application and operational software) Types of Software on the “Network of Computers” • Boot Software – not billed separately, included in cost of the hardware EMBEDDED • Operational Software (mostly UNIX) – at one time we were invoiced “small amounts” – now included in the hardware NOT EMBEDDED BECAUSE IN RAM • Application Software (wireless services software) – many, many programs that allows both you the user various features and us the ability to complete voice/data calls, do billing, fraud protection etc. NOT EMBEDDED BECAUSE IN RAM – loaded from disk, erased when power lost • Note – wireless switches are not on 24/7 – we do at least 2 complete software updates where ALL hardware is powered down per year (you roam at this time for a short period of time, usually on a Sunday night at 1AM) • All hardware has at least weekly maintenance which wipes out the RAM programs • Judge (Broward case) – even if it is really never shuts down…the fact is that it is stored in the RAM section of the memory of the computer and that, by definition, memory stored in RAM is not permanently embedded
Fourth Question on Removing Software • What is meant by “and is not removable without terminating the operation of the computer or equipment • We agree that if you remove the application (wireless service) software the “network of computers” would not be able to perform the desired function BUT • The statute does not state the INTENDED OPERATION, it states operation of the computer • If you remove the application software, the computers are all still operational, the operating program is still running and doing various functions • If you then remove the operating system, the computers are still operational although these would be just certain basic functions that were built into the boot software • Only If you remove the “boot software” the computer will terminate all operations • NOTE: the Florida law states - Permanently Embedded In Internal Memory AND removal of it terminates the operation of the computer or equipment Thus if the software is not permanently in internal memory (ROM), you never even need to address this question. Only if the Statute read OR would you needto answer this question (once again, if read correctly, the software would not be embedded).
Fifth Question • EXEMPTION or EXCLUSION? • 192 v 196 – Does it Matter • Palm Beach Circuit Court – Yes it does • 196 Is an exemption – burden of proof on taxpayer • 192 Is a exclusion, not taxable, the PA can’t just state it is taxable, they have the burden of proof to show the software fits into the narrow exception to non taxability. • Computer software constitutes personal property only to the extent of the value of the unmounted or uninstalled medium on or in which the information, program, or routine is stored or transmitted, and, after installation or mounting by any person, computer software does not increase the value of the computer or computer-related peripheral equipment, or any combination thereof.
Sixth Question • Legislative Intent? • County claims meant only for general purpose computers running general applications (word, excel etc.) • VZW claims all software except “embedded” not taxable • “…will particularly benefit businesses that utilize significant amounts of customized software in their operations (from Senate Staff Analysis and Economic Impact Statement)
Switch – network of computers Wireless Services Software – various applications Programs stored on hard drive, loaded into RAM RAM not permanent, erased when updated or diagnostics run Removal of software will not terminate the operation of the “computer” Only “boot software” in ROM is taxable Exclusion different than exemption Was part of the intent of the law to exempt all non embedded software, not just general applications * Also Correct Position as determined by Kevin Snow (cheers, applause) SUMMARY POSITION of VZW*
SUMMARY • Wireless Software Not Taxable • Switch is a Computer • Software is in RAM • RAM is not permanent • Software statute is an exclusion, not an exemption • shifts burden of proof – exclusions strictly construed against Property Appraiser • Not a Production Computer • FL Tangible Personal Property Guidelines Irrelevant • “Wireless Services Software” not embedded • Removing “Wireless Services Software” does not terminate operation of the computers • Was intended to be excluded from taxation by legislation