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

Wow

[DeathToBill]

Six days from the announcement of a new tax to being required to collect it? Really? How many businesses can change their processes that quickly?

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:Wow

[Penguinisto]

It may take about 5 minutes to change tax rates in software, but I suspect it'll take a hell of a lot more than five minutes to update pricing policy, sales processes (and processing), to revise revenue/profit forecasts, modify forms (to point out this new tax, so you don't lump it in with generic sales tax), get the finance folks up to speed...

Re:Wow

[Anonymous Coward]

Governments have been "singling out one group of businesses" since Hammurabi first passed a tax specifically targeting breweries. That horse left the barn millennia ago.

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:Wow

[phantomfive]

It's not changing the tax rate, it's introducing a new tax that was never there before. And that's even ignoring the fact that you'll need a lawyer to interpret the law, and decide which types of job will require the new tax, and which will not.

Re:Wow

[interval1066]

Hammurabi, benevolent as he may have been, didn't have to "pass" anything. He simply decreed it.

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

[Impy the Impiuos Imp]

States are spending more than ever. Cut off taxes and choke them seems to be the only way. See also the federal government.

As for Detroit, politicians past promised future generations' money to support retirees, a very easy thing to do.

We were warned about this. It is a vector to failure. I've just popped some popcorn over the whole thing. The reason these things are having problems is the math is identical to why the Ponzi scheme was made illegal -- charging current investors little or nothing in exchange for giving them the investmemt of future investors.

These schemes just have the perversity of being able to force you to be an investor.

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

[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:Only applies to prewritten software?

[gstoddart]

It also applies to Open Source software. And, what if you're not a reseller -- "you buy Windows, and I'll install and configure it".

Sadly, I'm just going to assume there will be all sorts of problems here -- because most of the time when lawmakers try to pass laws relating to technology, they fail miserably in their understanding of said technology and make a bigger mess of things.

Hey MA programmers! Move to NH.

[odigity]

We're just over the border, and we promise not to pull any shit like this on you.

Why? It's simple: http://freestateproject.org/

Re:Elsewhere

[Penguinisto]

If they need more tax money why not keep things simple and increase the income tax?

Seriously? How are you going to hide a tax hike if you keep it open and honest?

Re:Elsewhere

[Githaron]

I think a prefer the opposite. Abolish the income tax and make a standard sales tax across the board. Plan the shift over several years in order to decrease the immediate impact of the switch.

Companies never pay taxes. They shift that burder to the customer through increased prices. Placing the taxes directly on the end user makes the tax system more transparent.

Re:Elsewhere

[truthsearch]

That results in the poor paying proportionately more taxes than anyone else since they use almost all of their money to purchase necessities.