Massachusetts Enacts 6.25% Sales Tax On "Prewritten" Software Consulting

First time accepted submitter marshallr writes "Technical Information Release TIR 13-10 becomes effective in Massachusetts on July 31st, 2013. It requires software consultants to collect a 6.25% sales tax from their clients if they perform 'computer system design services and the modification, integration, enhancement, installation or configuration of standardized software.' TIR 13-10 was published to mass.gov on July 25th, 2013 to provide the public a few working days to review the release and make comments."

Comments

States really need revenue

[Anonymous Coward]

If you've followed the Detroit saga, you'll know that many states have made deferred pension deals with their unions that are now coming due as the Boomers retire.

Some states, such as Michigan have deferred liabilities of 241% of their annual revenue. Massachusetts is in the top 10 "bad" list (100%).(source of this is Moody's BTW, and this has been reported in The Economist)

What this means is that retiree benefits will take up an ever expanding part of state expenditures, crowding out education, police, fire, parks, and other benefits that modern citizens have come to expect.

So states are hungry for any revenue, Maryland for example, has set up a rain tax to tax people for the amount of rain that falls on their property (Maryland is in the top 10 "bad" list right next to Massachusetts), so the idea that they'd tax something in a completely arbitrary and crazy way will become the Normal.

You're about to see a wave of municipal bankruptcies all across this country, and local taxes are about to go through the roof.

Enjoy.

Re:States really need revenue

[PeeAitchPee]

Maryland for example, has set up a rain tax to tax people for the amount of rain that falls on their property

It's worse than that. As a Marylander (not for long because of this type of nonsense), I can also tell you that the rain tax, like most other taxes rammed through in the last five years or so, does NOT have to go towards saving the Chesapeake Bay (the justification used to pass it). The revenue goes into the state's general fund, where it is pissed away by the politicians to do things like give state loans to sports bars. This is a huge reason why states like CA, MD, and MA are destroying their tax bases as people and businesses flee by the millions to more tax-friendly states.

Re:States really need revenue

[roju]

The impervious surface fee actually makes a lot of sense, and isn't simply a "rain tax".

Storm-water runoff is a negative externality that right now everyone in a community pays for regardless of their actual runoff. It's a tragedy of the commons - there's no incentive to minimize it. Charging a fee based on the area of impervious surface on a property converts that externality into a direct cost, rewarding those who minimize runoff and charging those who produce the most runoff more. A property owner need only replace impervious surfaces with pervious surfaces and they'll produce less runoff and pay less; everyone wins. It's the same idea as a carbon tax.

Re:States really need revenue

[dkleinsc]

States are spending more than ever.

No they aren't

It's interesting to see folks talking about "OMG, the government is spending so much!!!!" when in fact it's been dropping like a rock since about 2009-ish. What actually happened was pretty simple to understand: In the fall of 2008 the economy took a nose-dive, shrinking the GDP and causing a lot more people to qualify for SNAP and unemployment insurance and SS disability and TANF and Medicaid and a few other programs. The cost of those programs predictably skyrocketed despite no new laws passing. Since then, as fewer and fewer people have qualified, the costs have been shrinking. Meanwhile, all the budgetary belt-tightening that had happened elsewhere in the budget is still in effect, so in fact government spending is shrinking fairly rapidly.

Also, tax revenue is the lowest it's been since 1941, so complaints about taxes being unusually high are also wrong.

Re:What is the reason for this tax?

[Tangential]

A generic "business" or "consulting" tax would mean that (for example) lawyers would charge a tax on their services. What are the odds of a law like that passing?

Re:Wow

[Chris Mattern]

It's not a new tax. 6.25% is the general sales tax in Massachusetts. This is just a ruling clarifying, "Yes, it applies to you guys too."

Re:Only applies to prewritten software?

[sinthetek]

It is no different than collecting taxes on any other service performed (eg cooking, barbering).

To my knowledge most states don't tax for services (especially not as highly as sales are taxed). Have you ever heard of a musician or lawyer (or even your aforementioned chef or beautician) having to collect any sort of sales tax?

Re:Wow

[skids]

Note that this effects a bunch of freelancers that are used to providing an untaxed service, and so have no idea how to go about collecting sales taxes and sending the proceeds to the government, since all they did was collect check, report it as SE income, and pay the social security tax on it on a personal income tax form.

Re: Hey MA programmers! Move to NH.

[Okian Warrior]

And have you paid your property taxes yet?

Yes, and gladly.

New Hampshire is always ranked one of the lowest states in overall tax burden: frequently the lowest, usually in the bottom three.

Massachusetts is always one of the highest, always in the top 10. (Citation)

So yes, I pay my property taxes, and they are unbearably high.

Are you saying that paying more overall is good, if it lowers property taxes?

What exactly is your point?

Re:Even I've heard of Taxachusetts

[coolmoose25]

I'm a Nutmegger (Connecticut) and what the poster above says is technically correct. CT has surpassed MA in taxes. A bit like being the best smelling puckerhole in the outhouse though. Just to the north, as others have pointed out, lies the promised land of New Hampshire. They have no sales tax, no income tax, lower cigarette taxes by a buck or two a pack, State liquor stores with nationally recognized low prices (think duty free) and cheaper gas. Cheap gas, cigarettes and booze! And a firearms friendly state as well. A beautiful state, with wonderful features and vistas. Good roads. No frills schools with high performing students. How do they do it? Well, high property taxes because state aid to towns is low, combined with a hefty "tourist tax" - high taxes on hotel rooms. My job keeps me in CT but I'm retiring to New Hampshire. My wife wants to retire to Cape Cod. I told her that as soon as MA cedes it to NH, I will move there.

Re:Wow

[paiute]

Its called Taxachusetts for a reason.

Actually, it makes a nice portmanteau, but it is now factually incorrect.

http://money.cnn.com/pf/features/lists/total_taxes/

Massachusetts is #40 on the total tax burden list. Lower than fucking Nevada and Louisiana.