Claris International’s FileMaker Pro software is at the center of a proposed class action filed by a Chicago women’s fashion and shoe boutique that alleges the company charged licensees sales tax impermissible under Illinois law.
According to the 15-page lawsuit, the defendant’s FileMaker Pro software is a cross-platform relational database designed to help small- and medium-sized businesses streamline their operations. The suit says FileMaker Pro, for which users need no advanced programming skills, can be licensed by businesses in “canned” form, meaning it can be purchased from a retailer that sells the software as a “mass-produced, pre-packaged, mass-marketed product.” In essence, customers who buy the “canned” form of FileMaker Pro all receive an identical program, the complaint specifies.
The plaintiff business argues that canned software is considered under Illinois law a “tangible personal property” no matter how it’s transmitted to a customer and, as such, is taxable when sold for general or repeated use. The case argues, however, that Illinois law also stipulates that a license of software is not taxable if it’s evidenced by a written agreement signed by the licensor and the customer; it restricts the customer’s duplication and use of the software; it prohibits the customer from licensing, sublicensing or transferring the software to another party without permission of the licensor; the licensor employs a policy of providing another copy of the software for minimal or no charge should the customer lose or damage the software; and the customer must destroy or return all copies of the software to the licensor at the end of the license period.
Claris International, which the case notes is an Apple subsidiary, has charged licensees of its software sales tax despite the fact that FileMaker Pro meets each of the five aforementioned sales tax exemptions specified by Illinois law, the lawsuit alleges. Per the suit, when the plaintiff business informed Claris International that it was charging FileMaker Pro licensees a prohibited sales tax for the canned software, the defendant “denied that the conduct was illegal.”