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This issue brings forth a wave of angry software devs that don’t know anything about taxes asserting that this is unprecedented and crazy. But at the end of the

This issue brings forth a wave of angry software devs that don’t know anything about taxes asserting that this is unprecedented and crazy. But at the end of the day, building software, ESPECIALLY for a novel startup, is building an asset. There might be some argument that there’s regular maintenance to be considered but generally speaking you are “building”. And that means it’s a capitalized cost. “It’s bad for me startup” is such a weak argument…

jopsen 3y ago
Honestly, I'd consider software more of a liability than an asset :) But how frequently does your code live a long an happy life? Some does, but much software has short lifespan.
- jncfhnb 3y ago
  I know it’s a joke but that’s not how it works. Liabilities are strictly debts to other people.
ilyagr 3y ago
Could you explain this in more detail? What is a capitalized cost? What is the logic in taxing this kind of cost more than others, or spreading the tax break over more years? I have some guesses, but I don't understand the basic philosophy of what should be a tax on the business, what should be a tax on the business owners (when their property becomes more valuable, e.g. capital gains tax), and what should be a tax on the employees' salaries (I guess this part is analogous to a sales tax on products the business buys).
- deleted 3y ago
  [deleted]
- jncfhnb 3y ago
  The basic idea behind accounting is recognizing when value comes in and out. E.g. if you get $100M up front to do work over 10 years, you don’t get $100M in revenue and nothing over the next 9 years. You spread the 100 over 10 years. Even if the cash comes in immediately. Capitalizing a cost means you’re saying this is a cost that is needed to build an asset that will provide value over time. If you build a factory or an app that is expected to help generate revenue over the next ten years then its dev costs should be allocated over the next ten years. Companies want to say all of the cost belongs in year 1 so that they can avoid paying any taxes in year 1. It is not taxed “more”. Capital gains tax is a separate thing not relevant to what’s being discussed. The salaries are not being taxed either (payroll tax is a separate idea here too). The question is which years should the salaries applied against revenue.
gizmo 3y ago
Angry software devs who likely believe any taxation is unjust. Today a startup can go from 0 to a 5bn IPO in 10 years without ever having made an accounting profit, and they get R&D credits they can deduct from payroll taxes along the way.
- imtringued 3y ago
  You're going to get more of those startups and less Startups that actually make a profit now. Why? Because a startup burning investor money doesn't have enough revenue to pay taxes in the first place. It is especially bootstrapped and cashflow positive startups that get hit hard and need outside investors to pay their tax debts now.
  - jncfhnb 3y ago
    If you don’t have meaningful revenue, then you don’t have meaningful taxes.
  - deleted 3y ago
    [deleted]
imtringued 3y ago
Okay, let's say that you are right and it doesn't matter if startups get disadvantaged and software developer salaries get depressed. You would still have to fill out in your time sheet whether you are doing maintenance or R&D. This will lead to developers being burdened with more bureaucratic busy work. From 12:30 to 13:00 I was working on updating software library X Y Z to the latest version and changing the code to use the new API. From 13:00 to 14:00 I added a new feature using the new API. Are those first thirty minutes maintenance? Can you deduct them? You as a software developer will have to know the tax rules now.
- jncfhnb 3y ago
  There is no such requirement for such tedious timesheets. Technically there’s no carve out for maintenance at all tbh.

jopsen 3y ago

Honestly, I'd consider software more of a liability than an asset :) But how frequently does your code live a long an happy life? Some does, but much software has short lifespan.

jncfhnb 3y ago
I know it’s a joke but that’s not how it works. Liabilities are strictly debts to other people.

ilyagr 3y ago

Could you explain this in more detail? What is a capitalized cost? What is the logic in taxing this kind of cost more than others, or spreading the tax break over more years? I have some guesses, but I don't understand the basic philosophy of what should be a tax on the business, what should be a tax on the business owners (when their property becomes more valuable, e.g. capital gains tax), and what should be a tax on the employees' salaries (I guess this part is analogous to a sales tax on products the business buys).

deleted 3y ago
[deleted]
jncfhnb 3y ago
The basic idea behind accounting is recognizing when value comes in and out. E.g. if you get $100M up front to do work over 10 years, you don’t get $100M in revenue and nothing over the next 9 years. You spread the 100 over 10 years. Even if the cash comes in immediately. Capitalizing a cost means you’re saying this is a cost that is needed to build an asset that will provide value over time. If you build a factory or an app that is expected to help generate revenue over the next ten years then its dev costs should be allocated over the next ten years. Companies want to say all of the cost belongs in year 1 so that they can avoid paying any taxes in year 1. It is not taxed “more”. Capital gains tax is a separate thing not relevant to what’s being discussed. The salaries are not being taxed either (payroll tax is a separate idea here too). The question is which years should the salaries applied against revenue.

gizmo 3y ago

Angry software devs who likely believe any taxation is unjust. Today a startup can go from 0 to a 5bn IPO in 10 years without ever having made an accounting profit, and they get R&D credits they can deduct from payroll taxes along the way.

imtringued 3y ago
You're going to get more of those startups and less Startups that actually make a profit now. Why? Because a startup burning investor money doesn't have enough revenue to pay taxes in the first place. It is especially bootstrapped and cashflow positive startups that get hit hard and need outside investors to pay their tax debts now.
- jncfhnb 3y ago
  If you don’t have meaningful revenue, then you don’t have meaningful taxes.
- deleted 3y ago
  [deleted]

imtringued 3y ago

Okay, let's say that you are right and it doesn't matter if startups get disadvantaged and software developer salaries get depressed. You would still have to fill out in your time sheet whether you are doing maintenance or R&D. This will lead to developers being burdened with more bureaucratic busy work. From 12:30 to 13:00 I was working on updating software library X Y Z to the latest version and changing the code to use the new API. From 13:00 to 14:00 I added a new feature using the new API. Are those first thirty minutes maintenance? Can you deduct them? You as a software developer will have to know the tax rules now.

jncfhnb 3y ago
There is no such requirement for such tedious timesheets. Technically there’s no carve out for maintenance at all tbh.