Software startup Cloud Elements, which relocated its headquarters to Denver from Centennial about two weeks ago, is considering moving back.
Boulder-based TalentRiot recently scrapped plans to move its team of 16 to Denver.
The mayor of Colorado Springs last week called Denver’s Spire Media and 303 Software in an effort to lure them out of the Mile High City.
The developments are a result of the recent revelation that Denver charges a 3.62 percent sales tax on software services such as mobile app and Web development. Most other cities in the metro area, and many of the nation’s prominent technology hubs, consider the services to be tax-exempt.
Executives from each of those companies joined about 30 others in a meeting with Denver officials Tuesday to express their concerns and push for change.
Denver says its tax code from 1987 covering “data processing programs” allows the city to tax custom software services. Tech executives and entrepreneurs are hoping that the city can simply re-interpret the code to remove its tax on custom software.
Denver Treasurer Steve Ellington said that’s possible but not likely. Such a change probably would require an exemption approved by the City Council.
“The city’s main revenue source is its sales-and-use tax, and so we have to be very judicious about how we go about making changes to existing code and items that are in the tax guide and have been in the tax guide since 1987,” Ellington said.
The meeting, organized by the Colorado Technology Association, grew tense at times as software entrepreneurs expressed frustration in having to collect and remit a tax that most of their competitors don’t face.
James Barry, a vice president with Cloud Elements, insisted that his company would be better off returning to Centennial even though the firm just moved 14 employees to Industry Denver in the River North District.
“We just signed one large contract and have two others that are probably going to sign,” Barry said. “We’re going to move out of Industry as fast as we can because it’s going to be cheaper for us to move and get space in Centennial again than it is to have space here.”
Mike Biselli, who is building a health-tech campus on 12.5 acres near Industry, said prospective tenant companies are shying away from the project because of the tax.
“I’m telling you right now, we’re losing companies,” he said. “Please take off the government hat and the government trap of saying, ‘We’re going to move slow and it’s going to take a long time,’ and think about how quickly we can solve this to continue to build on the momentum that all of these entrepreneurs in this room are building right now to make Denver one of the leaders in this country.”
The city is listening to the outcry from the startup community.
Denver economic development chief Paul Washington and Deputy Mayor and chief financial officer Cary Kennedy are scheduled to meet Wednesday with venture capitalist David Gold, technology association CEO Erik Mitisek and the founders of Spire Media and 303 Software.
The Denver Post’s article covering Spire Media’s and 303 Software’s dealings with city auditors and the tax on Web and app development — which is charged when both the seller and purchaser are based in Denver — shed light on the issue.
