, Salem, MA


August 7, 2013

Local IT companies grapple with computer services tax


The state expects the tax to bring in about $161 million, but the nonprofit Massachusetts Taxpayers Foundation estimates it could wind up vacuuming up $500 million. Some in the IT industry say that number could actually reach $1 billion, said Andrew Bagley, the foundation’s director of research and public affairs.

State Sen. Joan Lovely said the tax was part of a compromise between the governor’s $2 billion tax plan and the Legislature’s more modest plan to fix the state’s transportation infrastructure, which also raised taxes on gas and cigarettes. The intent, Lovely said, “is not to raise any more than” the tax was intended to raise.

“If it’s more than that, the Legislature vows to revisit it,” Lovely said.

While the sales tax does not cover all software services, such as training, it is broad enough that it is hard to tell when certain services may or may not be taxed. According to the state Department of Revenue, if a website designer is modifying prewritten software for a customer, the job is taxed. But if the designer creates custom software for a customer, that job is not taxed. Website hosting, data storage and disaster recovery and backup services are also not being taxed.

“This is confusing to me,” McDougall said. “That is the frustrating thing for a business owner. Now do I have to go and look into maybe not a website design but who knows if that is even on the table?”

Generally, a vendor should collect the new tax when the purchaser is a customer in Massachusetts, but because software companies do business all over, this too can be a source of confusion.

Michael Widmer, president of the Massachusetts Taxpayers Foundation, said his group tried to warn legislative leaders of the enormity of the bill back in May, “but they did not respond.”

Text Only | Photo Reprints

AP Video
US Stocks Plunge, Wiping Out July's Gains Looming Demand Could Undercut Flight Safety Six Indicted in StubHub Hacking Scheme Trump: DC Hotel Will Be Among World's Best AP Review: Amazon Fire Adds Spark to Smartphones All Aboard! LIRR Strike Averted Microsoft to Cut Up to 18,000 Jobs Time Warner Rejects Murdoch's Takeover Bid Yellen Says Economy Still Needs Fed Support Cleveland Expects Economic Boom From Lebron Justice Dept. Fines Citigroup $7 Billion Justice Dept. Fines Citigroup $7 Billion Downside of Low Mortgage Rates? Less Selling Cupcake Shop Crumbs Shuttering All Its Stores San Francisco Prepares for Soda Battle Dow Breaks Record 17,000
NDN Video
Famous Internet Cats Help Big Cause With Viral Video Raw: Obama Gets Hug From Special Olympian Snoop Dogg Narrating Animal Footage Is Perfect Tigers Acquire David Price - @TheBuzzeronFOX Russell Brand Slams Sean Hannity Over Gaza Conflict Segment Chapter Two: Composing for a film in retirement Woman's Dive Goes Terribly Wrong Brian Williams Reports on Daughter Allison Williams' 'Peter Pan' Casting News Did Jimmy Fallon Look Up Heidi Klum's Dress? What Drama? Miranda Kerr Poses Topless Plane crashes in San Diego Costco parking lot Justin Bieber Takes To Instagram To Diss Orlando Bloom You Won't Believe the Celeb Cameos in "Sharknado 2" Pitch Invading Morons Cause Chaos - @TheBuzzeronFOX Orlando Bloom 'Takes a Swing' at Justin Bieber In Ibiza Sadie Doesn't Want Her Brother to Grow Up "Maxim" Hotness! See Jessica Alba's Sizzling Spread Two women barely avoid being hit by train Broken Water Main Floods UCLA Orlando Bloom and Justin Bieber Reportedly Came To Blows In Ibiza
Comments Trcker