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August 13, 2014

When a taxing situation might shuffle plans

Out in the 3000 community some select customers are seeing subpoenas. According to a source familiar with the matter, a vendor's been having some issues with the Internal Revenue Service, and the US Government is intent on gathering what it believes it's owed.

1120pictureTax matters go to subpoena when information is being demanded in a case against a corporation or an individual. We're still seeking confirmation of the information about which vendor's name is now out among its customers, attached to a subpoena. [Update: And we have gotten it, plus a copy of the vendor's response. It's a long-term battle with the IRS, the vendor says. We've found documents going back more than 15 years. They claim that the fight is personal, not related to their company. Nonetheless, the vendor's customers got subpoenas.]

It illustrates the unpredictable nature of doing long-term business in the IT industry. HP 3000 users often do long-term business. They have a reputation for sticking to suppliers, especially in these days when companies are shifting focus away from MPE. When you get a tool that works, and a company that pledges to support it, you stick with it while you stay with the 3000.

"What do I do if they go out of business?" one of the customers has asked. The answer is simple enough: the products will go onto the open market to be purchased as assets. Software with customers who pay support fees, well, that's likely to be bought up sooner than later. An IT manager will have to manage new product ownership -- and perhaps new strategy and roadmaps for the product.

But just because there's change at the top of a product's ownership doesn't mean all else changes. It's pretty easy for a company to acquire a product and change little. Especially if the customer base is providing a profit to the vendor at the same time that the software continues to earn support contract renewals.

A sale of assets is the situation that Interex fell into when it declared Chapter 7 bankruptcy in 2005. There was not much of value for another company to purchase. Nobody was taking over the services Interex provided, so there was no customer base to buy as an asset. The only thing that wound up being transferred was the Interex customer list, transferred in a blind auction.

But software that's running in enterprises, across a scope of platforms even broader than MPE -- that's an asset that the government could sell. It's a typical outcome; for example, the trustee of the Interex bankruptcy managed the sale of the user group's assets.

Sometimes taxing issues can be resolved with negotiation. The government wants to be paid, and if there's fraud involved, the "accuracy-related penalties" can be steep. Lawyers with tax experience handle these things to everybody's satisfaction. Watch out for any company representing itself in tax court. Not recommended.

One flag about an imminent forced asset transfer could be an email sent out by the vendor, claiming the government has no right to tax anybody like they're being taxed. That's politics, not business. Nobody ever advised withholding support payments in this kind of matter. But you have to consider where that payment might be used, and whether it will end up someplace besides a support lab. Better to be current, and considered a customer, in case anything changes in ownership of an asset.

09:36 PM in Homesteading, Migration | Permalink

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