SalemNews.com, Salem, MA

Business

August 7, 2013

Local IT companies grapple with computer services tax

(Continued)

“What we explained to them, this is the most far-reaching tax on software services in the nation,” Widmer said. In a state that prides itself on innovation, Widmer said the sales tax could stifle it.

“The groundswell is building, and it’s going to become a tidal wave,” he said.

The computer services tax has created such an uproar in the IT business community that the North Shore Chamber of Commerce has scheduled a task force with members on Aug. 15 with state Sen. Bruce Tarr, R-Gloucester, to discuss it.

“From a broader perspective, I think we have enough taxes, and we don’t need any more,” said Robert Lutz, chairman of the North Shore Chamber of Commerce and president of Cabot Money Management of Salem. “This tax goes directly to the innovation ... area of the economy.”

The problem is the imposition of a sales tax on a service industry, said Salem attorney William Tinti, a past chamber chairman. “The distinction is very important. It’s like stepping into another world” as far as taxation is concerned.

“I don’t think it was very well thought out,” said David Gravel, a Peabody city councilor and CEO of GraVoc Associates, a small computer consulting firm on Main Street in Peabody. Sometimes the company writes its own software, sometimes it uses prewritten software, and sometimes it integrates many pieces of software to solve a business problem, Gravel said.

So, the question for him is, what services does he collect taxes on?

What riled Gravel was the short time frame — about a week — the state gave companies to implement and collect the tax, adding that companies have to reconfigure accounting systems to account for it. Gravel said the added confusion makes it hard on small companies just trying to get through the day.

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