7 ms·

Massachusetts Introduces Software Service Tax

76 points by imb 13y ago

sologoub 13y ago
What a mess... So if I buy a SaaS product that requires some config on the providers end, is that taxable too?
- kimura 13y ago
  Taxachusetts
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- kgrin 13y ago
  As of a few months ago, MA actually charges tax on SaaS sold to customers in MA - that's been pretty clear. (I got notices from a few of my SaaS providers and everything).
  - cschmidt 13y ago
    Really? Do you have a reference for that?
  - mjn 13y ago
    Texas also does as of a few years ago. In general services aren't taxed in Texas, but 17 classes of services are defined as taxable [1], ranging from movie-theater tickets to mobile-phone service to pest-control. One of those is data-processing services: Examples of data processing include check preparation; accounts payable or receivable preparation; web hosting, web site creation and maintenance; data storage, including offsite backup of electronic files; conversion of data from one type of medium to another (i.e. converting paper documents or videotapes to digital files); and the performance of a totalisator service with the use of computational equipment required by the Texas Racing Act. Data processing services providers include sellers of software as a service and application service providers. [1] http://www.window.state.tx.us/taxinfo/taxpubs/tx96_259.pdf http://www.window.state.tx.us/taxinfo/taxpubs/tx96_259.pdf
- deleted 13y ago
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tomkinstinch 13y ago
Is a plumber in Massachusetts required to charge tax on all services rendered, or only those that involve pre-made physical parts? Is there a paralogous example from a different profession that we can use to gain insight into this new law?
- asmithmd1 13y ago
  No plumbers don't charge sales tax on services; neither do doctors, lawyers, dentists, or landscapers. Sensible states tax things they want to discourage like gasoline use or smoking. They don't tax people trying work more.
  - Pxtl 13y ago
    It seems ridiculous to charge only one profession for providing service, and it sounds like software people just have the worst lobbyists and the worst public image (plumbers are the iconic symbol of the "little guy" small business). Here in Ontario it's much simpler (but steeper) - the harmonized provincial/federal sales and service tax is 13% on everything. Sales, service, you don't have to give a crap. There's a short list of exemptions for groceries and medical stuff. Our taxes are high, but straightforward.
    - mikegioia 13y ago
      You guys pay 13% every time money exchanges hands? Does that include when you eat a restaurant, and if so, do you also tip the waiter?
      - a-priori 13y ago
        No (some things are exempt), yes (food at a restaurant is both a good and a service), and yes (the HST goes to the restaurant, the tip goes to the waiter).
      - _delirium 13y ago
        You realize that in most of the U.S. you pay sales taxes on restaurant food and tip the waiter, right? In some states groceries are exempt from sales tax, but restaurant food is not exempted by any state (except in the trivial sense in states that don't have a sales tax at all).
tomheon 13y ago
According to a friend of mine who is relatively knowledgeable about this law, it was originally intended to target enterprise companies that were essentially selling software for next to nothing and then charging like mad for the "installation and configuration" to avoid sales tax. The wisdom of even that approach is debatable, but the actual language of the law is far from conveying that intent and is a total, indecipherable mess. No one has the remotest clue what is actually covered under the language of the law. I'm part of a small software consultancy in MA, and we've now got 30 days to decide which of our customers this crazy language applies to, and which it doesn't. Is Django "pre-written" software? Does spinning up and customizing an instance count? It's crazy town.
- Oculus 13y ago
  I think the idea is a fairly reasonable one, taxing large enterprises for charging insane support/servicing fees. Their implementation of it sounds really crappy though.
  - cpher 13y ago
    What on earth about this is "reasonable?" How is this any different from other professional services? We're supposed to live in a free market society where customers have the choice to pay those "insane" fees if they want to. You're advocating that the government stick their noses into the business decisions of the private sector. It's funny that this takes place at the site of the first tax rebellion.
    - nknighthb 13y ago
      Professional services taxes similar to sales taxes are not unheard of, nor are gross receipts taxes that vary based on what kind of business you're in. There are as many tax systems as there are tax jurisdictions. The problem here is somebody wrote a "services tax" without the first clue what they were actually doing. It's like intending to impose a new cigarette tax, but writing it such that anything which burns might fall under the definition of cigarette. Also, the main point is that they're not following the spirit of the law. The primary value is the software, but they're under-charging for it and over-charging for related services in order to avoid taxation on the true value of the software. That's what someone was ham-fistedly trying to fix.
asmithmd1 13y ago
MA has so many make-work jobs who do absolutely nothing at least they could leave those of us trying to do something alone. I was talking to a guy who used to be a product designer for Brookstone, Polaroid and GM. He has an idea to create 100 simple products all manufactured within 100 miles of Boston. http://www.onehundred.co http://www.onehundred.co He thought he would reach out to some MA economic development organization and let them know what he was doing. They got back to him right away, I forget which exact agency, to let him know they would not be able to provide any help. He was kind of miffed because he hadn't asked for anything - but now he knew they would not be able to help no matter what he might need. I tried to look up the agency he contacted and I found these agencies: Commonwealth Corporation MassDevelopment Mass. Office of Housing and Economic Development Mass. Office of Business Development Mass. Business Development Center Mass. Small Business Development Center Mass. Export Center Mass. Office of International Trade & Investment MassVentures Mass. Growth Capital Corporation Mass. Technology Collaborative Mass. Technology Transfer Center Mass. Clean Energy Center Mass. Life Sciences Center Commonwealth Marketing Office Don't worry about any waste or duplication - the Mass. Office of Performance Management & Oversight was created with the job of making sure all these groups are working together. Each of these places has dozens if not hundreds of employees with titles I can't even parody: Executive Assistant to the Deputy Director Program Assistant to the Director Director of Cluster Development http://www.masstech.org/meet-masstech/our-team/meet-our-staff http://www.masstech.org/meet-masstech/our-team/meet-our-staf... All of these people standing by ready to fire back an email that they really can't be of any help
- Zakharov 13y ago
  Well, I'd assume "Executive Assistant to the Deputy Director" is the secretary for the no. 2 at the MTC, which doesn't seem all that unreasonable. The "Program Assistant to the Director" is probably a project manager. The "Director of Cluster Development" is probably in charge of whoever is developing clusters, whatever those are. The titles are slightly overblown, but little more than I'd expect at any government department or large corporation.
  - asmithmd1 13y ago
rwhitman 13y ago
This has disturbing implications for the rest of the country. What happens if the developers of Massachusetts just roll over and give the state hundreds of millions of dollars of extra revenue? What message does that send to other states?
- noarchy 13y ago
  I have no doubt that this will spread. I'm almost surprised that it hasn't taken off before now. But as for the people of Mass., they won't be rolling over and "giving". It is money that will be taken. That's one of the big differences between a tax, and government "revenue", and the way a business makes its money.
  - hga 13y ago
    Maryland tried this and killed it, try this search: https://www.google.com/search?q=maryland+computer+services+tax https://www.google.com/search?q=maryland+computer+services+t... Particularly unwise given how easy it was for people to move to Northern Virginia.
- mjn 13y ago
  Your profile indicates that you live in NY. That state already charges a sales tax on the pre-written portion of software-services sales. So I'm not sure on what basis you suggest people should move out of MA in protest at such a tax. Are you planning to move out of NY to protest it?
  - rwhitman 13y ago
    Did I say that people should move out of MA to protest the tax? I'm pretty sure I didn't say that
readme 13y ago
Hey guys, The ABI Hub is an awesome coworking space and startup incubator in Manchester, NH. http://abihub.org/ http://abihub.org/ I've been going there for a few months and moved to NH at the beginning of the year. It has been awesome. There is a technology scene ready to bloom in Manchester. Also, the cost of living is about 50% of Boston's. For those who aren't from around here, NH doesn't have unfair taxes :)
- asmithmd1 13y ago
  NH has no sales tax and no state income tax. Of course you have much fewer "services" than MA. For example MA has a 19 member Commission on the Status of Women - which of course needs an executive director. And the executive director needs an assistant.
  - mindslight 13y ago
    But don't forget that reduced services include things like town water (you'll need a well with a radon filtration system), a reliable electric grid (you'll need a generator), and timely snow removal (you'll want a vehicle that uses thrice the fuel). And the crux of the matter - as NH does absolutely nothing against federal taxes, you'll still be paying the majority of your present transaction costs.
    - asmithmd1 13y ago
      You want to talk about town water? Boston and surrounding towns get water from the Quabbin reservoir. Due to above average rainfall this year it is filled to 95% capacity. If not one more drop of rain were added to the reservoir it would take 5 years to drain it at current use rate. So I was shocked when the MA DEP forced our town to restrict outdoor watering. Someone in a make work job decided our towns use was above a standard set for western towns and there is no debate. Restrict water use or be fined.
      - mindslight 13y ago
        Why were you shocked - had you just moved to MA? One town I was in won't pick up your garbage unless your recycling bin is out as well. No concept that someone could produce so little trash and would rather the quarter-full recycling sit the rare occasion they put out a trash bag. And of course it precludes taking the emptied bin in before the second truck comes around. And FSM help you if the guy decides to search in your bag and declares your trash demolition or construction material. They of course had color coded water restrictions posted everywhere busybodies frequented - elementary schools etc. And I can't not mention the legislature-dictated seat belt law. But my quarrel is that the nanny state is a symptom of how broken and autonomous our "representational" system is. One shouldn't have to give up civilization to get away from the busybodies, and escaping to NH is just a pressure relief valve. While the people doing it feel freer, this couldn't be further from reality - the ridiculousness has only become distant because other people are more distant. All types of militarized law enforcement may still freely kill them or their dogs while pretending to be heroes. Their communications are still stored indefinitely and mined for thoughtcrime. They're still prohibited from ingesting whatever chemicals they'd like. And they're still working over a quarter of the year to support these hostilities against them. But since they have an illusion of freedom they're likely to stop criticizing the entirety of the nanny state, focus on aspects they identify with, and flip to supporting it.
readme 13y ago
Throw all the software services into the harbor!
- saltyknuckles 13y ago
  Careful it may be considered terrorism these days.
  - CamperBob2 13y ago
    It certainly was at the time.
dunham 13y ago
There is a FAQ here: http://www.mass.gov/dor/docs/dor/law-changes/faqss-computer-software-2013.pdf http://www.mass.gov/dor/docs/dor/law-changes/faqss-computer-... Per question 23, it appears that adding a computer to a LAN is an example of a taxable service.
rwhitman 13y ago
"Singleton is upset that the technology industry did not lobby more strongly against the tax, and he worries it will hurt Massachusetts" It occurred to me I've been a developer for 13 years and have no clue who's got my back if the government starts to target my business unfairly. What kind of industry lobbies or trade groups are even out there to fight a law like this?
saltyknuckles 13y ago
Looks like Boston needs another tea party or LAN party? I don't know but something has to be done. It seems like this industry has been attacked unfairly as of late.
kgrin 13y ago
I'll say this as the owner of a small consultancy that will (probably) be affected by the new law: I have far less objection to the tax itself than the specifics of how it's implemented. In any case, it might first be worthwhile to read the actual language in question [1]. So with that in mind, the implementation problems include: 1) There was very little notice given to the affected parties - the bill passed July 24, effective July 31. (This is somewhat unavoidable, since part of the stated purpose of the tax is to fund transportation projects in 2013 - so delaying its effects would be counterproductive to the underlying goal). 2) There's still quite a bit of ambiguity surrounding implementation, including - crucially - what's taxable and what isn't. MA DOR (the state's version of the IRS) has issued some FAQs [2] and clarifications - which, annoyance aside, have actually been helpful. However, they only begin to answer the very real questions that this presents for many businesses - but we're responsible for collecting the tax basically yesterday (first filing due September 20, to cover taxes starting August 1). I read today that DOR will issue additional clarification and guidance in October... which I can only assume will be retroactive. So we'll likely be forced to either charge some people an unnecessary tax, or take an unexpected 6% revenue cut, or possibly end up having to pay penalties. Merits of the tax aside, the uncertainty - inevitable with such a new rule! - is what's killer. 3) Broadly speaking, the distinction they're trying to draw in the law does seem a bit weird. As I understand it (and IANAL, but have talked to a few - all of whom are still trying to parse what this means), if I write a custom CMS "from scratch", that's still considered a tax-free service. If I train you on, say, Wordpress (or any open-source or commercial product, really), that's still tax-free as well. If, however, I build a plugin to integrate Wordpress with your in-house SSO system - that's taxable. A custom theme? Probably. Where do frameworks fit in? (Say, if I write you a shiny, custom CMS in Django). I don't know. There's a specific clarification issued by DOR that operating systems are exempt - or rather, to quote directly: "Custom application software (including custom software that incorporates such proprietary code) that is designed to run on a prewritten operating system is treated as custom software and not as a modification of the prewritten operating system software." There are some interesting caveats being carved out - for example: "Suppose a computer system is designed but not actually built, so software is never actually integrated with hardware. Are the services still subject to sales tax? No." Again, while on the whole I'd of course prefer that this tax go away entirely, at the end of the day it's no more or less rational than the taxation (or non-taxation) of many other goods and services. The critical problem here is the implementation, which introduces a whole lot of uncertainty and risk into a business that, until a few days ago, has never had to deal with this sort of thing. [1] http://www.mass.gov/dor/businesses/help-and-resources/legal-library/tirs/tirs-by-years/2013-releases/tir-13-10.html http://www.mass.gov/dor/businesses/help-and-resources/legal-... [2] http://www.mass.gov/dor/docs/dor/law-changes/faqss-computer-software-2013.pdf http://www.mass.gov/dor/docs/dor/law-changes/faqss-computer-...
coldcode 13y ago
Move. Now. The more people leave the state and/or refuse to provide services to people there the less money they get. Sure it's not a easy thing to do at all but the only way politicians get a message if it there is a high price attached.
curiousdannii 13y ago
Why do all the American states have different taxes? Here in Australia we have 10% GST (Goods and services tax). So wherever you're from in the country you can expect both goods and services to be priced the same. So much simpler for the average consumer!
- vermontdevil 13y ago
  The name of the country is United States of America. So it was formed that way - each of the original 13 states got together to form a more perfect union. But each of the 13 states retained some autonomy including ability to levy tax within the state for various means or purposes. Been that way ever since. Can't see a national tax - our culture would not allow it.
  - LoganCale 13y ago
    You mean like the national income tax?
    - vermontdevil 13y ago
      That money funds the Federal government. Completely different.
  - rdouble 13y ago
    There is a national tax on gasoline.
    - protomyth 13y ago
      The gas tax is a use tax which has been federally acceptable (interstate highway). Income tax required a constitutional amendment.
    - vermontdevil 13y ago
      Let me try again. I'm talking about a national tax to divide among the states. Federal Income tax, Gasoline tax, etc all fund the Federal Government. And yes the Feds does distribute some of the money via grants or a Congressional action (Medicaid, highway funds, etc). But I don't see the US adopting a national use tax like VAT that is collected by the Federal government but automatically given out to the states based on where the money is spent. Our country likes to keep things on the state and local level as much as possible.
camz 13y ago
I practice tax law and write for forbes on tax law.. this area of law may seem confusing, but that is mostly for the media buzz. The law has generally been fairly clear. Many states have long had laws that taxed "pre-written or canned software." MA is just one of the newer states that have enacted this law. New York has had the law in the books for years. Pre-written software means that you've previously created software and you've literally re-used the code. Professional, custom or designed software is still exempt as a "professional service." What happens when you're like SAP and you start with canned software, but then customize it? Then, you pay sales tax on the canned portion and then you don't pay tax on the customization costs. In sales tax audits, they test this by comparing code sold off the shelf to the code presented as "custom." Generally, consultants are used. There are also sales tax on "informational reports." This started as paying sales tax for "stock tips" sent over the fax. But, today this has extended to informational reports that were created by software. Thus, a lot of businesses that "don't sell canned software" and provide a "service" cannot escape the tax law by simply providing the end product alone. I can understand people getting angry, but the law has been around for a while... I've gone through multiple audits with companies such as reuters, bloomberg and etc. I don't particularly feel that its unfair, since if you provide a "custom service" then you're exempt. Obviously, there are always going to be ways to "technically" get away with avoiding sales tax, but that doesn't mean that they're inherently unfair. Companies avoided paying sales tax on software for a while, until the states realized that they were being cheated by these businesses. Then, businesses decided that if we don't sell the software on "CDs" then its not tangible property and "legally not taxable." So, they would bring the CDs and install the software and then leave with the CD's to effectively avoid the sales tax. Then, they started to allow the software to be hosted online and only provide the "end-product aka SaaS." Services are commonly exempt and hard to follow, thus they escaped the states radar for years. Its a cat and mouse game that will continue. I think the best example is if an attorney or accountant were to provide the same exact tax return or memo to everyone, then it'd be taxable under sales tax law. But, because we provide a different memo or tax return to everyone (maybe using a system like turbotax or something), it is a custom product because the service is only applicable to that person. If the developer provides a copy of turbo tax, then its taxable because its always the same. But, if the developer uses RoR, Python or some other system to "create" the end product for the individual, then its not taxable. Hopefully, this crude example is decent enough to get the point across.
asmithmd1 13y ago
Why computer services? Why not tax something no one likes - radio and TV ads
cpursley 13y ago
Taxachusetts...
Dangeranger 13y ago
In the state of Vermont where I live our legislature introduced and passed a similar bill several years ago, under nearly identical circumstances. Nestled into another bill, the state house inserted and passed a sweeping tax on "Cloud Services" which affected all software delivered to the end user via the internet. The real salt in the wound for businesses was that the tax was going to be retroactively applied to the previous four years of revenue. This would have driven a fair share of our fledgling technology sector out of business almost immediately. Thankfully, our Governor did not agree with the way the tax was passed into law, nor how it was applied. He first delayed and eventually removed the tax all together. When politicians sneak revenue draining taxes into the business market like this, without public comment or discussion, it makes me truly concerned that they are simply self interested. Hopefully the Massachusetts state house will pull their heads out of the sand and clear up the confusion with their constituents. Maybe by next election cycle, those affected will let their feelings be known in the polls.
jwatte 13y ago
The main problem I have with this is that they are taxing information work that is clean, to fund /freeways/. Way to go, 20'th century!

76 points by imb 13y ago

sologoub 13y ago

What a mess... So if I buy a SaaS product that requires some config on the providers end, is that taxable too?

kimura 13y ago
Taxachusetts
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kgrin 13y ago
As of a few months ago, MA actually charges tax on SaaS sold to customers in MA - that's been pretty clear. (I got notices from a few of my SaaS providers and everything).
- cschmidt 13y ago
  Really? Do you have a reference for that?
- mjn 13y ago
  Texas also does as of a few years ago. In general services aren't taxed in Texas, but 17 classes of services are defined as taxable [1], ranging from movie-theater tickets to mobile-phone service to pest-control. One of those is data-processing services: Examples of data processing include check preparation; accounts payable or receivable preparation; web hosting, web site creation and maintenance; data storage, including offsite backup of electronic files; conversion of data from one type of medium to another (i.e. converting paper documents or videotapes to digital files); and the performance of a totalisator service with the use of computational equipment required by the Texas Racing Act. Data processing services providers include sellers of software as a service and application service providers. [1] http://www.window.state.tx.us/taxinfo/taxpubs/tx96_259.pdf http://www.window.state.tx.us/taxinfo/taxpubs/tx96_259.pdf
deleted 13y ago
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tomkinstinch 13y ago

Is a plumber in Massachusetts required to charge tax on all services rendered, or only those that involve pre-made physical parts? Is there a paralogous example from a different profession that we can use to gain insight into this new law?

asmithmd1 13y ago
No plumbers don't charge sales tax on services; neither do doctors, lawyers, dentists, or landscapers. Sensible states tax things they want to discourage like gasoline use or smoking. They don't tax people trying work more.
- Pxtl 13y ago
  It seems ridiculous to charge only one profession for providing service, and it sounds like software people just have the worst lobbyists and the worst public image (plumbers are the iconic symbol of the "little guy" small business). Here in Ontario it's much simpler (but steeper) - the harmonized provincial/federal sales and service tax is 13% on everything. Sales, service, you don't have to give a crap. There's a short list of exemptions for groceries and medical stuff. Our taxes are high, but straightforward.
  - mikegioia 13y ago
    You guys pay 13% every time money exchanges hands? Does that include when you eat a restaurant, and if so, do you also tip the waiter?
    - a-priori 13y ago
      No (some things are exempt), yes (food at a restaurant is both a good and a service), and yes (the HST goes to the restaurant, the tip goes to the waiter).
    - _delirium 13y ago
      You realize that in most of the U.S. you pay sales taxes on restaurant food and tip the waiter, right? In some states groceries are exempt from sales tax, but restaurant food is not exempted by any state (except in the trivial sense in states that don't have a sales tax at all).

tomheon 13y ago

According to a friend of mine who is relatively knowledgeable about this law, it was originally intended to target enterprise companies that were essentially selling software for next to nothing and then charging like mad for the "installation and configuration" to avoid sales tax. The wisdom of even that approach is debatable, but the actual language of the law is far from conveying that intent and is a total, indecipherable mess. No one has the remotest clue what is actually covered under the language of the law. I'm part of a small software consultancy in MA, and we've now got 30 days to decide which of our customers this crazy language applies to, and which it doesn't. Is Django "pre-written" software? Does spinning up and customizing an instance count? It's crazy town.

Oculus 13y ago
I think the idea is a fairly reasonable one, taxing large enterprises for charging insane support/servicing fees. Their implementation of it sounds really crappy though.
- cpher 13y ago
  What on earth about this is "reasonable?" How is this any different from other professional services? We're supposed to live in a free market society where customers have the choice to pay those "insane" fees if they want to. You're advocating that the government stick their noses into the business decisions of the private sector. It's funny that this takes place at the site of the first tax rebellion.
  - nknighthb 13y ago
    Professional services taxes similar to sales taxes are not unheard of, nor are gross receipts taxes that vary based on what kind of business you're in. There are as many tax systems as there are tax jurisdictions. The problem here is somebody wrote a "services tax" without the first clue what they were actually doing. It's like intending to impose a new cigarette tax, but writing it such that anything which burns might fall under the definition of cigarette. Also, the main point is that they're not following the spirit of the law. The primary value is the software, but they're under-charging for it and over-charging for related services in order to avoid taxation on the true value of the software. That's what someone was ham-fistedly trying to fix.

asmithmd1 13y ago

MA has so many make-work jobs who do absolutely nothing at least they could leave those of us trying to do something alone. I was talking to a guy who used to be a product designer for Brookstone, Polaroid and GM. He has an idea to create 100 simple products all manufactured within 100 miles of Boston. http://www.onehundred.co http://www.onehundred.co He thought he would reach out to some MA economic development organization and let them know what he was doing. They got back to him right away, I forget which exact agency, to let him know they would not be able to provide any help. He was kind of miffed because he hadn't asked for anything - but now he knew they would not be able to help no matter what he might need. I tried to look up the agency he contacted and I found these agencies: Commonwealth Corporation MassDevelopment Mass. Office of Housing and Economic Development Mass. Office of Business Development Mass. Business Development Center Mass. Small Business Development Center Mass. Export Center Mass. Office of International Trade & Investment MassVentures Mass. Growth Capital Corporation Mass. Technology Collaborative Mass. Technology Transfer Center Mass. Clean Energy Center Mass. Life Sciences Center Commonwealth Marketing Office Don't worry about any waste or duplication - the Mass. Office of Performance Management & Oversight was created with the job of making sure all these groups are working together. Each of these places has dozens if not hundreds of employees with titles I can't even parody: Executive Assistant to the Deputy Director Program Assistant to the Director Director of Cluster Development http://www.masstech.org/meet-masstech/our-team/meet-our-staff http://www.masstech.org/meet-masstech/our-team/meet-our-staf... All of these people standing by ready to fire back an email that they really can't be of any help

Zakharov 13y ago
Well, I'd assume "Executive Assistant to the Deputy Director" is the secretary for the no. 2 at the MTC, which doesn't seem all that unreasonable. The "Program Assistant to the Director" is probably a project manager. The "Director of Cluster Development" is probably in charge of whoever is developing clusters, whatever those are. The titles are slightly overblown, but little more than I'd expect at any government department or large corporation.
- asmithmd1 13y ago

rwhitman 13y ago

This has disturbing implications for the rest of the country. What happens if the developers of Massachusetts just roll over and give the state hundreds of millions of dollars of extra revenue? What message does that send to other states?

noarchy 13y ago
I have no doubt that this will spread. I'm almost surprised that it hasn't taken off before now. But as for the people of Mass., they won't be rolling over and "giving". It is money that will be taken. That's one of the big differences between a tax, and government "revenue", and the way a business makes its money.
- hga 13y ago
  Maryland tried this and killed it, try this search: https://www.google.com/search?q=maryland+computer+services+tax https://www.google.com/search?q=maryland+computer+services+t... Particularly unwise given how easy it was for people to move to Northern Virginia.
mjn 13y ago
Your profile indicates that you live in NY. That state already charges a sales tax on the pre-written portion of software-services sales. So I'm not sure on what basis you suggest people should move out of MA in protest at such a tax. Are you planning to move out of NY to protest it?
- rwhitman 13y ago
  Did I say that people should move out of MA to protest the tax? I'm pretty sure I didn't say that

readme 13y ago

Hey guys, The ABI Hub is an awesome coworking space and startup incubator in Manchester, NH. http://abihub.org/ http://abihub.org/ I've been going there for a few months and moved to NH at the beginning of the year. It has been awesome. There is a technology scene ready to bloom in Manchester. Also, the cost of living is about 50% of Boston's. For those who aren't from around here, NH doesn't have unfair taxes :)

asmithmd1 13y ago
NH has no sales tax and no state income tax. Of course you have much fewer "services" than MA. For example MA has a 19 member Commission on the Status of Women - which of course needs an executive director. And the executive director needs an assistant.
- mindslight 13y ago
  But don't forget that reduced services include things like town water (you'll need a well with a radon filtration system), a reliable electric grid (you'll need a generator), and timely snow removal (you'll want a vehicle that uses thrice the fuel). And the crux of the matter - as NH does absolutely nothing against federal taxes, you'll still be paying the majority of your present transaction costs.
  - asmithmd1 13y ago
    You want to talk about town water? Boston and surrounding towns get water from the Quabbin reservoir. Due to above average rainfall this year it is filled to 95% capacity. If not one more drop of rain were added to the reservoir it would take 5 years to drain it at current use rate. So I was shocked when the MA DEP forced our town to restrict outdoor watering. Someone in a make work job decided our towns use was above a standard set for western towns and there is no debate. Restrict water use or be fined.
    - mindslight 13y ago
      Why were you shocked - had you just moved to MA? One town I was in won't pick up your garbage unless your recycling bin is out as well. No concept that someone could produce so little trash and would rather the quarter-full recycling sit the rare occasion they put out a trash bag. And of course it precludes taking the emptied bin in before the second truck comes around. And FSM help you if the guy decides to search in your bag and declares your trash demolition or construction material. They of course had color coded water restrictions posted everywhere busybodies frequented - elementary schools etc. And I can't not mention the legislature-dictated seat belt law. But my quarrel is that the nanny state is a symptom of how broken and autonomous our "representational" system is. One shouldn't have to give up civilization to get away from the busybodies, and escaping to NH is just a pressure relief valve. While the people doing it feel freer, this couldn't be further from reality - the ridiculousness has only become distant because other people are more distant. All types of militarized law enforcement may still freely kill them or their dogs while pretending to be heroes. Their communications are still stored indefinitely and mined for thoughtcrime. They're still prohibited from ingesting whatever chemicals they'd like. And they're still working over a quarter of the year to support these hostilities against them. But since they have an illusion of freedom they're likely to stop criticizing the entirety of the nanny state, focus on aspects they identify with, and flip to supporting it.

readme 13y ago

Throw all the software services into the harbor!

saltyknuckles 13y ago
Careful it may be considered terrorism these days.
- CamperBob2 13y ago
  It certainly was at the time.

dunham 13y ago

There is a FAQ here: http://www.mass.gov/dor/docs/dor/law-changes/faqss-computer-software-2013.pdf http://www.mass.gov/dor/docs/dor/law-changes/faqss-computer-... Per question 23, it appears that adding a computer to a LAN is an example of a taxable service.

rwhitman 13y ago

"Singleton is upset that the technology industry did not lobby more strongly against the tax, and he worries it will hurt Massachusetts" It occurred to me I've been a developer for 13 years and have no clue who's got my back if the government starts to target my business unfairly. What kind of industry lobbies or trade groups are even out there to fight a law like this?

saltyknuckles 13y ago

Looks like Boston needs another tea party or LAN party? I don't know but something has to be done. It seems like this industry has been attacked unfairly as of late.

kgrin 13y ago

I'll say this as the owner of a small consultancy that will (probably) be affected by the new law: I have far less objection to the tax itself than the specifics of how it's implemented. In any case, it might first be worthwhile to read the actual language in question [1]. So with that in mind, the implementation problems include: 1) There was very little notice given to the affected parties - the bill passed July 24, effective July 31. (This is somewhat unavoidable, since part of the stated purpose of the tax is to fund transportation projects in 2013 - so delaying its effects would be counterproductive to the underlying goal). 2) There's still quite a bit of ambiguity surrounding implementation, including - crucially - what's taxable and what isn't. MA DOR (the state's version of the IRS) has issued some FAQs [2] and clarifications - which, annoyance aside, have actually been helpful. However, they only begin to answer the very real questions that this presents for many businesses - but we're responsible for collecting the tax basically yesterday (first filing due September 20, to cover taxes starting August 1). I read today that DOR will issue additional clarification and guidance in October... which I can only assume will be retroactive. So we'll likely be forced to either charge some people an unnecessary tax, or take an unexpected 6% revenue cut, or possibly end up having to pay penalties. Merits of the tax aside, the uncertainty - inevitable with such a new rule! - is what's killer. 3) Broadly speaking, the distinction they're trying to draw in the law does seem a bit weird. As I understand it (and IANAL, but have talked to a few - all of whom are still trying to parse what this means), if I write a custom CMS "from scratch", that's still considered a tax-free service. If I train you on, say, Wordpress (or any open-source or commercial product, really), that's still tax-free as well. If, however, I build a plugin to integrate Wordpress with your in-house SSO system - that's taxable. A custom theme? Probably. Where do frameworks fit in? (Say, if I write you a shiny, custom CMS in Django). I don't know. There's a specific clarification issued by DOR that operating systems are exempt - or rather, to quote directly: "Custom application software (including custom software that incorporates such proprietary code) that is designed to run on a prewritten operating system is treated as custom software and not as a modification of the prewritten operating system software." There are some interesting caveats being carved out - for example: "Suppose a computer system is designed but not actually built, so software is never actually integrated with hardware. Are the services still subject to sales tax? No." Again, while on the whole I'd of course prefer that this tax go away entirely, at the end of the day it's no more or less rational than the taxation (or non-taxation) of many other goods and services. The critical problem here is the implementation, which introduces a whole lot of uncertainty and risk into a business that, until a few days ago, has never had to deal with this sort of thing. [1] http://www.mass.gov/dor/businesses/help-and-resources/legal-library/tirs/tirs-by-years/2013-releases/tir-13-10.html http://www.mass.gov/dor/businesses/help-and-resources/legal-... [2] http://www.mass.gov/dor/docs/dor/law-changes/faqss-computer-software-2013.pdf http://www.mass.gov/dor/docs/dor/law-changes/faqss-computer-...

coldcode 13y ago

Move. Now. The more people leave the state and/or refuse to provide services to people there the less money they get. Sure it's not a easy thing to do at all but the only way politicians get a message if it there is a high price attached.

curiousdannii 13y ago

Why do all the American states have different taxes? Here in Australia we have 10% GST (Goods and services tax). So wherever you're from in the country you can expect both goods and services to be priced the same. So much simpler for the average consumer!

vermontdevil 13y ago
The name of the country is United States of America. So it was formed that way - each of the original 13 states got together to form a more perfect union. But each of the 13 states retained some autonomy including ability to levy tax within the state for various means or purposes. Been that way ever since. Can't see a national tax - our culture would not allow it.
- LoganCale 13y ago
  You mean like the national income tax?
  - vermontdevil 13y ago
    That money funds the Federal government. Completely different.
- rdouble 13y ago
  There is a national tax on gasoline.
  - protomyth 13y ago
    The gas tax is a use tax which has been federally acceptable (interstate highway). Income tax required a constitutional amendment.
  - vermontdevil 13y ago
    Let me try again. I'm talking about a national tax to divide among the states. Federal Income tax, Gasoline tax, etc all fund the Federal Government. And yes the Feds does distribute some of the money via grants or a Congressional action (Medicaid, highway funds, etc). But I don't see the US adopting a national use tax like VAT that is collected by the Federal government but automatically given out to the states based on where the money is spent. Our country likes to keep things on the state and local level as much as possible.

camz 13y ago

I practice tax law and write for forbes on tax law.. this area of law may seem confusing, but that is mostly for the media buzz. The law has generally been fairly clear. Many states have long had laws that taxed "pre-written or canned software." MA is just one of the newer states that have enacted this law. New York has had the law in the books for years. Pre-written software means that you've previously created software and you've literally re-used the code. Professional, custom or designed software is still exempt as a "professional service." What happens when you're like SAP and you start with canned software, but then customize it? Then, you pay sales tax on the canned portion and then you don't pay tax on the customization costs. In sales tax audits, they test this by comparing code sold off the shelf to the code presented as "custom." Generally, consultants are used. There are also sales tax on "informational reports." This started as paying sales tax for "stock tips" sent over the fax. But, today this has extended to informational reports that were created by software. Thus, a lot of businesses that "don't sell canned software" and provide a "service" cannot escape the tax law by simply providing the end product alone. I can understand people getting angry, but the law has been around for a while... I've gone through multiple audits with companies such as reuters, bloomberg and etc. I don't particularly feel that its unfair, since if you provide a "custom service" then you're exempt. Obviously, there are always going to be ways to "technically" get away with avoiding sales tax, but that doesn't mean that they're inherently unfair. Companies avoided paying sales tax on software for a while, until the states realized that they were being cheated by these businesses. Then, businesses decided that if we don't sell the software on "CDs" then its not tangible property and "legally not taxable." So, they would bring the CDs and install the software and then leave with the CD's to effectively avoid the sales tax. Then, they started to allow the software to be hosted online and only provide the "end-product aka SaaS." Services are commonly exempt and hard to follow, thus they escaped the states radar for years. Its a cat and mouse game that will continue. I think the best example is if an attorney or accountant were to provide the same exact tax return or memo to everyone, then it'd be taxable under sales tax law. But, because we provide a different memo or tax return to everyone (maybe using a system like turbotax or something), it is a custom product because the service is only applicable to that person. If the developer provides a copy of turbo tax, then its taxable because its always the same. But, if the developer uses RoR, Python or some other system to "create" the end product for the individual, then its not taxable. Hopefully, this crude example is decent enough to get the point across.

asmithmd1 13y ago

Why computer services? Why not tax something no one likes - radio and TV ads

cpursley 13y ago

Taxachusetts...

Dangeranger 13y ago

In the state of Vermont where I live our legislature introduced and passed a similar bill several years ago, under nearly identical circumstances. Nestled into another bill, the state house inserted and passed a sweeping tax on "Cloud Services" which affected all software delivered to the end user via the internet. The real salt in the wound for businesses was that the tax was going to be retroactively applied to the previous four years of revenue. This would have driven a fair share of our fledgling technology sector out of business almost immediately. Thankfully, our Governor did not agree with the way the tax was passed into law, nor how it was applied. He first delayed and eventually removed the tax all together. When politicians sneak revenue draining taxes into the business market like this, without public comment or discussion, it makes me truly concerned that they are simply self interested. Hopefully the Massachusetts state house will pull their heads out of the sand and clear up the confusion with their constituents. Maybe by next election cycle, those affected will let their feelings be known in the polls.

jwatte 13y ago

The main problem I have with this is that they are taxing information work that is clean, to fund /freeways/. Way to go, 20'th century!