SalemNews.com, Salem, MA

Opinion

August 15, 2013

Our view: Time for Legislature to listen on software tax

This morning, a cadre of business and political leaders, including representatives from the Massachusetts Taxpayers Foundation and major local employers like Peabody’s Analogic, will gather in Danvers to try to figure out how to respond to the Legislature’s newest and most addlebrained tax.

We refer, of course, to the new 6.25 percent sales tax on computer services, and the smart folks gathered at this morning’s special meeting of the North Shore Chamber of Commerce seem to be just as confused by it as the rest of us. If that’s not an indication the problem needs to be fixed, and soon, we don’t know what is.

The tax was tucked into the recently passed state transportation bill and is aimed at “certain services relating to computer system design and to modification, integration, enhancement, installation or configuration of standardized or prewritten software.”

The rules covering the tax are so broadly written as to be essentially useless for any business — small or large — trying to figure out how they apply. For example, according to state tax officials, if a state website designer is changing prewritten software for a customer, the work is taxed. But if that same designer creates new software, the job is not taxed. Software training isn’t taxed. Installing it is.

Confused? You’re not alone. When the Geek Squad visits your home to work on your computer system, they’re going to need to bring along a CPA. (And don’t forget, the cost of any new tax is passed along to you, the consumer.)

“I think it’s nerve-wracking as a small business, and I think businesses are already struggling, John McDougall, founder of Danvers-based McDougall Interactive Marketing, told reporter Ethan Forman last week. “Why add to that?”

Dave Gravel, a Peabody city councilor and CEO of a computer consulting firm, said he’s still trying to figure out how the tax applies to his business. Sometimes GraVoc Associates writes its own software, sometimes it uses prewritten software, and sometimes it pulls together many different pieces of software to complete a project. Where do you collect tax on a project like that?

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