Committee approves removing downloadable-software exemption to fund expanded family affordability credit

The Senate Appropriations Committee on Monday adopted and passed House Bill 12-23, which eliminates the downloadable-software sales-tax exemption and redirects the revenue to an expanded family affordability credit and targeted relief for restaurants.

Sponsor explanation: A sponsor told the committee that the downloadable-software exemption allows downloads to avoid sales tax, creating a modern-era mismatch between in-store packaged sales and internet downloads. The bill removes that exemption and directs the resulting revenue to an expanded family affordability credit (EFAC) and to two temporary restaurant-related sales-tax relief measures; the sponsor said this is a policy choice about allocating revenue to working families and certain small businesses.

Fiscal mechanics and TABOR: Committee members asked whether the expanded credit creates new taxpayer refunds and how the refundable credit interacts with TABOR and the general fund when the state is below the TABOR cap. Sponsors and other members explained that the change effectively replaces revenue currently not reaching the general fund (because of the exemption) with the new credit and that when refunds apply below the cap they would be paid from the general fund as with other refundable credits.

Committee action: The committee adopted amendments J1, L21, L23 and L24 and then approved the bill as amended 4–3.

What’s next: The bill moves from committee for further consideration; supporters framed the measure as an allocation decision to help families and restaurants, while some committee members sought clarity on long-term fiscal estimates.