Can I deduct academic software being used non-academically?
March 29, 2006 10:40 AM   Subscribe

If I use my sister's college-student discount to by computer products at a reduced price, but claim them as expenses for my home business, will anyone care?

The problem being that I'm not using the products for the academic uses proscribed by the academic licenses. I look forward to being able to pay for the retail versions of these products once this home business starts to have a positive cash flow, but, chicken/egg, but I'd rather have them on academic licenses than no licenses at all. I know that the IRS won't go telling on me to the software makers, but might they decline to approve them as tax deductions if/when they realize they were bought/used under false pretenses?
posted by anonymous to Work & Money (18 answers total)
You may as well just pirate the program you want to use and buy it later. (Seriously)
posted by chunking express at 10:58 AM on March 29, 2006

The worst case is that you get busted by both the IRS and Business Software Alliance (or a similar enforcement group) and get audited and sued. Both of these are insanely unlikely. More likely is that nothing at all will happen, even if you choose to pirate the software.

However, by starting with an academic copy, you're outing yourself some cash as on some software you can't upgrade from an academic license to a new full version without paying the new price again. So you'll be paying full price plus the academic license you've already paid for. If this is hardware and not software, I wouldn't worry.

Shortly after graduation I had a friend who was still enrolled buy me some Apple hardware. The discount was worth using him as an intermediary, but the discount is only around 10% -- not all that cheap. Software, on the other hand, is often steeply discounted. I'd worry a lot more about it as it's more closely linked with work for hire.
posted by mikeh at 11:11 AM on March 29, 2006

God will care.

Or, to put it another way, your conscience is already bothering you. I don't see a huge moral problem in your using the academic license for a non-academic purpose, but the double whammy of first violating the terms of the licence and then deducting it from your taxes just feels a little sordid. (And then there's the little matter of what figure you will use to deduct, the "student" or the "business" license? Either way you're setting yourself up for worry.)

Is there no freeware or trial version of the software you can use until the money starts rolling in? Or isn't there some other free or lower-cost software that performs most of the same tasks as the brand name?
posted by La Cieca at 11:11 AM on March 29, 2006

You may as well just pirate the program you want to use and buy it later. (Seriously)

On the one hand, you'll be violating the license of the software just as badly as if you'd pirated it. So you might as well pirate it.

On the other hand, I'm not sure if what you'd be doing would be illegal because if your sister buys it legaly, and never installs it (thus never clicking through a EULA) she has the legal right to resell it, or give (that one copy) away.

Obviously pure piracy would be a violation of copyright.

The tax stuff makes no difference at all. It would only ever come up if you were audited by the IRS, and in that case it still won't be a problem, because the IRS is not in the business of enforcing copyright licenses.
posted by delmoi at 11:28 AM on March 29, 2006

If you don't care all that much about pirating them, well, there's your answer.

Otherwise, the benefits of having a real REGISTERED copy might outweigh the cost at the academic price. For example, with some software pirated versions are very difficult -> impossible to upgrade, whereas the "real deal" can phone home and let you update it (example: Windows XP).

Now, if you think about it this way, you might be OK:

Your friend buys said software and does not like it. They choose to exercise their right of first sale and re-sells that software to you. Let's just say the license agreement on the software happens to be generic for all copies (as is likely... it seems to be pretty popular not to bother changing that legalese). Can you ignore the sticker on the software?

In my opnion, yes. I am not a lawyer, though. However, most license agreements, due to their nature of not having consideration (ie: You sign away rights without any provision for those rights made to you -- remember, you ALREADY paid for the software, you can't use the consideration twice) do not make fully binding contracts (*). This usually means judges have to pore over them and decide what is OK and what isn't according to standard copyright law and prior decisions.

I doubt any software company has the time or effort to try to prove the debate about OEM/Academic software to a judge for one person.

Does that help?

(*) -- They are still binding (ProCD v. Zeidenberg; Rudder v. Microsoft Corp; Kanitz v. Rogers Cable Inc.), however, in the same ways as any other standard business contract would be. Unreasonable terms, however, are not [For example, asking for your first born = not binding, asking for you to not sell copies of the software = binding]. The question is: Is limiting the right of first sale legally binding without consideration? That's why almost all license agreement disputes have to be figured out by judges and are a pain in the ass. IMHO and IANAL, again, of course.
posted by shepd at 11:33 AM on March 29, 2006

I second La Cieca's answer. Go open source. There's a free open source alternative to pretty much everything out there.

Email me if you need any help.
posted by rinkjustice at 11:41 AM on March 29, 2006

Except for some anal retentive mefites, no one will care. The IRS will not care because it was a legitimate business purchase and they don't care how much you paid for it as long as it's accurately reflected in your taxes. The BSA will never pursue an individual because it wouldn't be news worthy or profitable, not to mention you did purchase the software legally.
posted by doctor_negative at 12:07 PM on March 29, 2006

I guess the real issue is that doing something that is not right is actually not good for you in the first place. Thats why we have each been given a conscience.

The idea that we can each choose what is right for us is just liberal fundamentalism.

So whilst I don't know whether what you are proposing is right or wrong (I am NOT the judge) I think that you will know and so can make the right decision which itself will mean that it is right for you.
posted by pettins at 12:17 PM on March 29, 2006

What you're proposing is, like everyone else has said, doubly illegal, unethical, and morally corrupt.

So, the answer to your question is "No, you cannot deduct it."
posted by unixrat at 12:30 PM on March 29, 2006

shepd writes "Let's just say the license agreement on the software happens to be generic for all copies (as is likely... it seems to be pretty popular not to bother changing that legalese)."

The vast majority of educationally priced software limits use of the software to academic purposes in the license. Some of the stuff I deal with even limits the educational priced software to students or to specific instructional use or to non-profit purposes which in all three cases means I buy full retail versions for curriculum development employees writing texts for the software.
posted by Mitheral at 12:46 PM on March 29, 2006

No, you can't. The software in question is not for your use, you'll be breaking the license agreement the second you use it for a non-academic purpose, and then you'll be using it illegally, with no license at all.

The IRS probably won't care how/where you got them and what you do with them so long as you provide receipts. They might care in an audit, and may be legally required to notify the necessary parties if they do find out. So, beware.

Are you really so hard up for cash that you can't afford to pay? If so, are you willing to live with doing illegal things to start your own business? You'll just be tempted to not bother purchasing the legal copies. Why bother when the illegal ones work as well?

Go get a business loan if it's that important, like everyone else. Stop trying to cut corners and do illegal things. Use Open Source if don't have or don't want to spend the money. That's what it's there for.
posted by Phynix at 12:53 PM on March 29, 2006

What you're proposing is, like everyone else has said, doubly illegal, unethical, and morally corrupt.

I think the only thing ilegal would be using the software for profit, when the student license probably only allows for its use in an academic setting. I am pretty sure, as others have said, you could claim its purchase on your taxes.

As to all of this being unethical and morally corrupt: wtf? We're talking about software piracy, not extraordinary rendition or something.
posted by chunking express at 1:01 PM on March 29, 2006

If you're using Microsoft products, look into something like TechNet where you get ALL their software for a steeply discounted price. It's a bit bigger layout at the begining, but you get multiple licenses and everything you'd want at a steep discount.
Other options: Attend free Technet and MSDN seminars, I've gotten free copies of MS Office, Visual Studio, Windows, with full-licenses just for showing up. My latest aquisition was Microsoft Office Small Business, which I got for watching a few free webcasts. There are options out there. Be honest in what and how you use your software, you may never get caught, but an uneasy conscience will haunt you every day of your life. You can also look into Microsoft Beta programs and run the latest versions of all their software for free.
And finally if that's not enough, switch to open source.
I don't believe that any savy computer user should be paying (fullprice anyways) for software when there are a million ways to get it legally for free. I don't pirate, yet the only program I paid for was WindowsXP, and that was in a bundle when I bought my computer, and yes, I run Office, Visual Studio, and just about everything else you can think of, legally.
posted by blue_beetle at 2:10 PM on March 29, 2006

The IRS doesn't care, it's an expense. The fact that you are violating license is between you and the software folks. So long as purchasing software and writing it off is within IRS guidelines it'll be fine.
posted by phearlez at 2:14 PM on March 29, 2006

Covered extensively at this previous MeFi thread...

blue_beetle: I don't believe that any savy computer user should be paying (fullprice anyways) for software when there are a million ways to get it legally for free.

Getting a physical copy of software is 100% not the same as getting a license for said software. Check the license for any of the packages you described above, and you'll likely find that they're not intended for use by a business for general purposes that you'd normally buy them off the shelf for... and as described above, because you purchase software "licenses" rather than "software" (like you would lumber or pancakes), operating under a restricted license is the same as pirating.
posted by VulcanMike at 2:35 PM on March 29, 2006

Since so many people are saying this is all about the license... until someone actually DOES it, we won't know if first sale doctrine beats out BS license requirements. It's up to a judge, in the end, because of the fact that software licenses are so flimsy (as compared to real life signed licenses, like a lease, for example).
posted by shepd at 5:35 AM on March 30, 2006

My understanding -- bolstered by the Wikipedia entry -- was that first sale applied to sale and not the general validity of a license agreement. First sale would mean you could resell the software, but it wouldn't mean that you could ignore the restrictions of the license -- you could sell your educational copy to someone else, but it would still be an educational copy.

It's one thing to debate the right of sale from a license perspective -- and that's why it's so mired in controvery and conflicting decisions. But if you expressly accept a limited use agreement in exchange for a discounted price on the software, that seems to be a much different -- and much clearer -- situation.
posted by VulcanMike at 8:36 PM on March 30, 2006

Blah. I misstated -- certainly the validity of the license is questioned by the first sale situation. Still, though, I believe the discounted price in exchange for limited use aspect of the educational software purchase is a bit different -- you're expressly choosing a particular version of the software, sold at a lower price, with the express and reasonable understanding that the software has more limited uses.
posted by VulcanMike at 8:42 PM on March 30, 2006

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