17 ms·

The Massachusetts Software Tax

205 points by neilkelty 13y ago

dccoolgai 13y ago
This is surely one of the most irresponsible pieces of legslation nywhere this decade.
- velodrome 13y ago
  They should create a tax for lawyers. They are far less productive than engineers -- all they do is argue all day and not create anything of value.
  - tomjen3 13y ago
    Tax politicians, they are completely useless.
  - DannyBee 13y ago
    Uh, you have a strange view of 1. what the average engineer does all day 2. What the average lawyer does all day Most lawyers spend time working on client's problems, not "argue all day". Lawyers bill their time often in 5 minute increments, and only charge for time they are actually doing something. If the average engineer sat down and tracked what they did every 5 minutes of the day, i think you'd find they are a lot less productive than they think.
    - velodrome 13y ago
      In California, lawyers bill hourly and in the $300-400/hr range. But your right, we should look to Congress because they are actually quite productive. Majority of them have a background in political science and law. http://www.fas.org/sgp/crs/misc/R42365.pdf http://www.fas.org/sgp/crs/misc/R42365.pdf http://www.senate.gov/CRSReports/crs-publish.cfm?pid=%260BL%2BR%5CC%3F%0A http://www.senate.gov/CRSReports/crs-publish.cfm?pid=%260BL%...
      - DannyBee 13y ago
        All lawyers have an hourly rate, the question is the minimum time unit they charge for. I'm not sure what congress has to do with any of this. I could point out engineers doing plenty of evil unproductive and wasteful things too (malware, fart apps, NSA surveillance applications, whatever), but much like your original complaint, it's just character assassination
        velodrome 13y ago
        It is clear your a lawyer of some kind. I am not trying to demean your profession or others who practice law. I was using role reversal to make a point. I should have used "legislator" instead. So, I apologize for that. The decision-makers are mostly comprised of people with a background in law. Why is it fair to pass a law for taxing software development but not taxing the act of practicing law? I just think it is unfair for legislators to protect their professional occupation at the expense of others. There clearly needs to be more diversity among people who hold public office. As for unproductive engineers - sure, there are plenty. The same applies to all other professions. However, it is hard to argue against the progress made by STEM fields over the last few centuries.
  - consz 13y ago
    >They are far less productive than engineers -- all they do is argue all day and not create anything of value. Proof? This is worthless of a statement as "[Lawyers] are far less productive than engineers -- all they do is read reddit all day and not create anything of value."
    - velodrome 13y ago
      STEM, by nature, makes people more productive. Wheel, Bicycle, Train, Car, Airplane. The more productive people are, the more wealth can be generated. http://www.fas.org/sgp/crs/misc/R42530.pdf http://www.fas.org/sgp/crs/misc/R42530.pdf http://www.myvisajobs.com/Reports/2012-H1B-Visa-Category.aspx?T=OC http://www.myvisajobs.com/Reports/2012-H1B-Visa-Category.asp...
velodrome 13y ago
It's a great way to drive that particular business out of the state. If they apply this tax towards STEM education, then the benefit might be worth it.
- MetaCosm 13y ago
  You understand that if it drives the business out of state, there is no benefit, no upside. There is no money to go towards STEM, and if the states general economy goes down over it -- it is a net-negative on STEM.
  - velodrome 13y ago
    I was just pointing out: if they had no choice, then apply it towards growth instead of some sinkhole project. But yes, it is a net negative....I just don't understand why they would do this. They should be offering incentives to stay there. This is a self-invoked brain drain.
  - tomjen3 13y ago
    Bull there will be a huge benefit - the lost business will no longer have to suffer under the idiocities of the Mass. government.
  - deleted 13y ago
    [deleted]
chiph 13y ago
What a mess. At this point I'm not inclined to sell to anyone in the state.
- MetaCosm 13y ago
  Which is really annoying if you have existing clients in the state. It is really poorly worded and confusing, my tax attorney has no idea where our work product falls tax wise.
- dsr_ 13y ago
  It only applies to you, the seller, if you are located or have an office in Massachusetts.
  - acomar 13y ago
    > Anyone working in the IT industry who sells software or related services to any business that has any office in Massachusetts. So no, it applies if your client is located in the state.
    - mjn 13y ago
      It doesn't (and can't, unless Congress changes the law) override the basic requirement that Massachusetts can only require you to collect sales tax if you have a Massachusetts nexus establishing jurisdiction. However if you are 1099 consulting for an MA client, in many cases that will establish an MA nexus, so this will apply to many consultants who have MA clients. On the other hand if you purely operate a website where people can purchase software or hosted services with a credit-card, and you have no MA presence, merely having customers from MA won't establish an MA nexus.
      - antihero 13y ago
        What if I'm in the UK? Am I going to get extradited?
      - yourapostasy 13y ago
pkmehta 13y ago
This is going to increasingly become common esp as governments try to cover budget gaps. We just went through a sales tax audit for our SaaS company and so are expecting a good size bill for taxes not paid + penalties. Yes - fun stuff. Honestly, the gov't folks are playing whack-a-mole here trying to keep up with fast-growing areas that don't fit the old "you sell this widget for $X" model they're used to. And so they're going to write overly broad rules as they don't understand technology and related industries. There is no intrinsic reason that SaaS should be free of tax and so the more worrying aspect of this legislation (NY has similar) is that it is so difficult to understand and open to interpretation and the mental tax it imposes on businesses who live in a cloud of of uncertainty about how they should treat their revenues. That said, I think the idea that it will drive biz out of the state is naive. California is not a particularly biz friendly state in terms of taxes but the Valley and even LA seem to be doing just fine.
- MetaCosm 13y ago
  I stopped working with a client already over this. Simply put, cash-flow wise I can't currently risk taxes and penalties. It turned a customer into a liability because of the horrible wording and unclear guidance (seriously, they want us to pro-rate by the % of our software used in the state?). I suspect many other small start-ups will make the same choice we did until this all gets sorted out.
  - grumps 13y ago
    Out of curiosity - what made you feel that burden was placed on your company? From what I saw if you didn't have a MA tax ID and didn't have a physical presence in the state that burden would be placed on the purchaser. Personally I read that it's kind of like sales tax, and buying online. If the seller doesn't do business in the state you reside it's up to the purchaser to pay the tax.
    - MetaCosm 13y ago
      My lawyer was unable to assure me of this -- the law is terribly written. Due to the nature of the data worked on, I have to travel to MA and do a major component of the work on site. My understanding is "rewording and clarifications" are coming. I know my client (employes hundreds of people) has unleashed a bit of hell over this -- we will see what will happen.
skrebbel 13y ago
Wow, so if I run a SaaS from, say, the Netherlands, I'm going to have to pay Massachusetts some kind of extra income tax? What if I don't even know where my customers reside? The US just became a little more EU. Congratulations! EDIT: I meant 'import tax' where I wrote 'income tax'. Sorry for the confusion.
- kalleboo 13y ago
  It only applies if your company has a physical presence in Massachusetts (shop or office). State taxation is the same reason Amazon avoid putting warehouses in certain states, since it means they have to start collecting sales tax on everyone in that state. As long as they stay out of the state and do all their dealing across borders, they're don't have to collect the sales tax.
- mjn 13y ago
  It's not an income tax, it doesn't apply to hosted services, and it doesn't apply to companies not doing any business in Massachusetts. The people this impacts are those currently consulting for MA clients in a capacity that was not considered software sales previously, but now might be. For example, if you sold an analytics package in boxed software, that was always clearly a "sale" and is unchanged. But if your business is based around, for example, having a free SaaS analytics service, along with an offer that enterprise clients can pay you to get a self-hosted version installed on their own servers, that has typically been treated as consulting in MA, but is being reclassified as selling software. The theory is that you are basically selling software (a copy of the analytics package), not really consulting, and the fact that you didn't put it in a box with a bar code is irrelevant. The complaints are largely based around the vagueness of the definitions and the short notice of implementation.
- metaphorm 13y ago
  sales tax, not import tax. the tax is implied internally as well, not only to transactions from foreign businesses.
brokenmusic 13y ago
Until people realize that all taxes are theft, they're doomed to have new taxes imposed on the most productive of them. It's really a simple test to see whether taxes are theft or not: if there was no way for IRS to find out how much money anyone made, would people still be paying taxes? My guess is that 90% of people who preach about the social contract and helping the poor would keep the money.
- dreamdu5t 13y ago
  The fact that taxes are operational theft is why taxes that affect everyone are seldom passed. Specific industries or products are targeted because there's less resistance. For example, many people will sneer at this tax yet cheer on other taxes they don't have to pay.
- crazygringo 13y ago
  If taxes are theft, then your use of roads, police, courts, eating at restaurants approved by health inspectors, and much more -- that's all theft of your own. Sorry, but taxes are not theft in any general way, by any stretch of the imagination.
  - thallium205 13y ago
    It takes some seriously deep-seeded, institutionalized indoctrination assaulting your mind through most of your life to believe taxation is not theft. If you do not pay your tax, violence is threatened and will be brought upon you if you do not comply. This is theft. It does not matter if the thief uses it for altruism. It does not matter if the thief forces roads and other services upon you by outlawing competition. The fact remains that the initiation or even the threat of violence against an otherwise peaceful person is wrong, and trying to argue otherwise is an indefensible position.
    - marvin 13y ago
      You are free to go off-grid and live in the woods, free from the shackles of taxed services like roads, police protection and tap water. If you still make enough money to pay tax, you'll still technically be breaking the law - but I doubt anyone is going to come into the forest to put you in jail. So in practice you'll be free and clear. You could also go to a nation in sub-Saharan Africa where there is in effect no government. No taxes! Except for the armed bandits which will take away all your stuff. But surely you can pay out of pocket for a professional defense force to take care of that problem.
asmithmd1 13y ago
I don't understand how they singled out software developers. Why not lawyers or landscapers or pool service. Why not tax something that no one likes that can't move out of state - TV and radio ads?
- deleted 13y ago
  [deleted]
- chalst 13y ago
  What makes you think this only applies to software developers? I provide editorial and publishing consulting - I don't write code to sell, but I do configure and patch other people's code. Am I covered by this law? Well, I guess I am. Easiest solution for me: don't accept clients in Massachusetts.
  - grumps 13y ago
    If you don't have physical ties to the state, I believe it isn't your problem, it's theirs, then again I'm not a lawyer or an accountant.
  - troels 13y ago
    Oh you can accept them alright. Just recharge the extra tax to the customer, if they're from MA. You don't even need to worry about if it applies to that particular invoice or not - Just add it in any case.
    - Daniel_Newby 13y ago
      Assessing a fee under false color of law is a serious crime.
      - troels 13y ago
        I wouldn't suggest that you keep the funds for your self. You could just pay it through in any case - I'm sure the MA tax department wouldn't mind. And I would also assume that to be a lawful practise. The point is that you make it clear why your customers are being charged extra. It's then up to them to contact their local representatives and ask them to change the law. If you're not based in MA, it's not really your problem. Sucks for businesses in MA of course.
dsr_ 13y ago
MA resident. The biggest problem with this is the timing: tell us in July that it goes into effect on January 1, we can deal. Tell us it goes into effect in a week? Hah.
- loumf 13y ago
  That and the fact that the line between custom software and customizations of pre-written software isn't very clear (or if clear, draconian). The way they wrote it, a custom WordPress template sounds like a customization (therefore taxable), but a site not hosted in a CMS is custom (non-taxable).
rayiner 13y ago
Unfortunately Mass. has unfunded pension liabilities exceeding $20 billion (not including municipalities), and unfunded health care liabilities exceeding $45 billion (including municipalities. At the same time, states will have to deal with the new normal, which is lower economic growth indefinitely and lower returns on invested assets. As a result, states will ratchet up taxes to cover their increasingly untenable budgets, as we've seen in Illinois (which recently almost doubled its state income tax) and Mass. My guess is that this process will accelerate the internal migratory trends that are already in place. E.g. Nebraska, which banned defined-benefit pensions in the 1960's is sitting pretty with $43 of unfunded liabilities per person. Relevant to tech, the following states have big research universities (and thus a supply of educated workers) and also relatively manageable unfunded liabilities: Pennsylvania, Michigan, Wisconsin, Texas, and North Carolina: http://www.nasra.org/resources/Moodys1101.pdf http://www.nasra.org/resources/Moodys1101.pdf.
- mjn 13y ago
  I don't disagree with the macro point, but if you don't like this particular tax, Texas would be a poor choice of alternatives, because it already applies sales tax to an even broader class of software services than MA is now doing. For example, even hosted services like SaaS are covered under the Texas taxable-services definition, in cases where Texas has sales-tax jurisdiction (e.g. your business has an Austin office, and you have clients in Houston). See section Data Processing Services here: http://www.window.state.tx.us/taxinfo/taxpubs/tx96_259.pdf http://www.window.state.tx.us/taxinfo/taxpubs/tx96_259.pdf Examples of data processing include ... 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... . Data processing services providers include sellers of software as a service and application service providers. That would, for example, mean that a service like Tarsnap or Heroku would be subject to Texas sales tax, if they had a Texas nexus for sales-tax purposes, which isn't the case in Massachusetts even under the new law.
  - arohner 13y ago
    I disagree, because in Texas, the sales tax is significantly more clear who is affected. "You have an office in Texas, you pay tax" is pretty simple.
tehwalrus 13y ago
This is insane. Either add a sales tax (fixed %) to all B2B transactions (like UK VAT, which you're exempt from if you're tiny) or just don't. This minefield of regulations about what's taxable and what isn't will just make it much more expensive to sell things, as people pay for lawyers/accountants to figure out what "tax" to add to every outgoing invoice. Since this will decrease consumption, it will reduce other tax revenues, as well as making this pot smaller. Mad. Stark Raving.
- neltnerb 13y ago
  Agreed. I run a small business (thankfully not doing software) in Massachusetts. I don't mind collecting sales tax, but when they make it an overhead nightmare it's impossible to figure out. I'm just one person; when your revenues are in the $10k range, hiring someone to figure it out is impossible. If they just charged a fixed rate for everything it would at least not so heavily favor big business over small companies. I'm also confused because it seems that most of the reasoning is that companies sell the software for cheap and then make the service contract expensive. I've seen this done by companies like Autodesk and National Instruments for sure, so I can see why they'd dislike it. I design custom equipment, and I'd be tempted to do the same (charge at close to cost for equipment and charge as a service for labor). But this seems like an incredibly poorly conceived way to fix the problem that will cause more issues than it will address, and it's surely not limited to software. I could pull the same trick in any kind of contract work.
  - mvc 13y ago
    > software for cheap and then make the service contract expensive If the software is cheap, it is expensive to service it.
    - pc86 13y ago
      I know what you're saying, but I think his point was if you spend $100k developing software, sell it for $100 and sell service contracts for $10k instead of selling it for $5k with a similarly priced service contract.
hqsavvy 13y ago
I ran a consulting business in Ontario Canada from 1999-2004 Today the provincial sales tax is included (harmonized) with the federal sales tax as the HST (8% + 5% = 13%) but back then they were charge separately as PST and GST. Each tax act treated software and software services differently. When we started we were compatriots with many such contractors in the city. They said, confirmed by our accountant, that our services were not PST eligible so we collected and submitted only the federal GST. This we did for 5 years without any incident; like an audit from the province. In 2004 our business failed and we were in the process of closing up shop when the feds audited our GST history and found that in 2001-2004 our GST submissions were off and we owed about 30k incl interest and files. We made arrangements to pay the bill. Painful but under control. But, the federal audit triggered a provincial audit and that's when we discovered that the rules for PST regarding software/it services had changed during our run, making the work we did subject to the 8% PST. The rules for that are eerily similar to those described in the OP. The provincial government determined that the changes to The Act were retroactive and covered all the business we ever did and that with interest and penalties we owed over 700k payable by the end of that week or they would take action. The company was broke so he action we were threatened with was that, as officers of the company, we were personally liable for the amount and that if not paid by the end of the week, our personal bank accounts would be frozen. This was not good. Further we found out that at that time, these rules were only enforced when a PST audit occurred. So, when we told the many contractor pals in town that this could be a problem for them. a) they didn't believe it, and b) AFIK none of them changed their practice of collecting only the GST. Anyways, there was a loophole where a customer could assume the liability for the PST by giving us a waiver form. Luckily the majority of our work was with one customer, a huge corp, who agreed to do this and we were off the hook. It was a very stressful week. PS. I have not done any consulting since 2004 so I am not aware of any subsequent changes to The Act. AFIK, none of the contractors I know were dinged the way we were. I figure that harmonization of the taxes means they are collecting tax for both govt entities now.
- hqsavvy 13y ago
  PS. Our Errors and Omissions insurance did not cover the tax bill
- 13y ago
6d0debc071 13y ago
I wonder whether you can just 'give away' the free upgrades and the like and charge a standard consulting fee with the operation that folds the price into it.
nighthawk24 13y ago
This is definitely going to backfire. Stuff will be outsourced. The state should provide incentives to the best of IT crowd.
patio11 13y ago
And it’s not just Massachusetts developers that have to deal with this. It’s anyone who has clients who have “software” that is being “used” in Massachusetts. Talk to your lawyer if you doubt me on this one, but Quill vs. North Dakota means that it is the well-settled law [+] of the United States that you cannot be liable for sales or use taxes enacted by a state which you don't have a "nexus" in. What exactly constitutes a "nexus" can be hazy, but the punchline for the overwhelming majority of HNers is that if you do not have an employee who performs work for you within Massachusetts you almost certainly do not have a nexus there. Theoretically HN users who are also Massachusetts residents will have to start remitting use tax to the state to cover purchases of covered which they made from out-of-state merchants. It is an open secret that compliance in the US with use taxes is nearly zero. + Well, until they pass that threatened Internet tax legislation.
- mjn 13y ago
  > the punchline for the overwhelming majority of HNers is that if you do not have an employee who performs work for you within Massachusetts you almost certainly do not have a nexus there If you're a consultant who does work on-site for an MA client, that may also establish a nexus. In some cases it can do so even if you don't physically travel to MA, since the services can be deemed to have been rendered in the client's location. But others are deemed to have been rendered in the consultant's remote location. It's a little conceptually (and legally) unclear where remote services "happen", and seems to depend on the state and the service and the precise consulting relationship.
  - will_work4tears 13y ago
    Conventions that are work related and you work at a both promoting your work or products counts as well it seems. I had a client that went to Vegas several times a year for a convention and just running a booth made Vegas a nexus for him.
- grumps 13y ago
  I just scanned the FAQs from the MA DOR. Seems one should avoid having any physical presence in the state of MA. Avoiding the Physical presence would require the client to handle the burden of the tax.
coldcode 13y ago
As I said before when this came up, the only thing that will cause politicians to change the rules is money. As in abandon the state entirely so they don't get anything. Move away, change your business, whatever it takes and then let the politicians (and the public) know why you are giving up on them. Sure it's painful but that's the only thing that gets the attention of the idiots in charge.
jpmattia 13y ago
> [Mass. DOR FAQ] It doesn’t matter where you host the information. If the business you’re working for has offices in Massachusetts, you have to collect tax. Sounds like the solution is pretty obvious. And I doubt anyone will miss Boston winters.
psi_rockin 13y ago
Although it's certainly obnoxious and poorly thought out, in the long run we development shops will get all the edge cases figured out, though dealing with the legislature is going to be like pulling teeth. Although it would increase startup costs and decrease ROI for us, let's not forget who actually pays this tax: our clients, the buyers of these services. If you are a Massachusetts company and you buy technical services, you now have a really strong incentive to head north to New Hampshire or south to Rhode Island. Massachusetts is also small enough that you might be able to pull that off without losing too many employees.
- bhickey 13y ago
  If you're looking to minimize your taxes, Rhode Island is a poor choice. Property tax in Providence is $33.75 per $1000 ($19.25 for owner-occupied property) levied on 100% of the assessed value. On top of this, the state has a huge unfunded pension liability and municipal benefits liability (~$2.3bn). State employees and teachers benefits add up to another $7bn. When the other shoe drops, the money is going to come from somewhere or the state will go bankrupt.
yahelc 13y ago
Is there a reason this article doesn't mention what the actual tax rate is? According to other articles, it's 6.25%, but that omission from this article seems glaring. Is it because that number is perceived as low, and mentioning it undermines the argument of how dire opponents think it is? (Genuinely asking, not trolling; my employer is almost certainly going to be hit by this tax.)
- mjn 13y ago
  I think it's not mentioned because it's not a separate tax with its own rate, but a change in what categories of transactions sales tax applies to. Therefore the rate is just the regular sales-tax rate. The controversy is over what should be covered by sales tax more than the rate.
crazygringo 13y ago
I can't find the link to the previous HN thread about this (and Google isn't helping), but someone had posted that the whole point of this tax was to essentially close a loophole where normal software sales are taxed, but a consulting firm who makes a tiny tweak and sells the software under "consulting services" because they "install a solution" for the client, doesn't charge sales tax. So if that's accurate, it makes perfect sense. Of course, crafting a law that actually targets this and this only is extremely hard to do, and the short notice here is ridiculous. But if that's the actual motivation behind the law, it's just a case of where do you draw the line between selling products (taxed) and selling services (not taxed)? Of course there's a gray area between them.
- techiferous 13y ago
  The motivation of the law is to raise revenue for transportation, not close a legal loophole.
- ars 13y ago
  > but a consulting firm who makes a tiny tweak and sells the software under "consulting services" because they "install a solution" for the client, doesn't charge sales tax. Then the consulting firm would pay the sales tax when they buy the software (before tweaking it).
Vivtek 13y ago
I like this translation of the FAQ into plumbing and carpentry services as an analogy that makes things easier to understand for non-software people (especially the one about RV plumbing that makes it clear that the buyer is liable for use tax for all use of the RV's plumbing within Massachusetts). http://repealtheitservicetax.com/2013/08/02/plumbing-and-carpentry-service-tax-parody/ http://repealtheitservicetax.com/2013/08/02/plumbing-and-car...
rkaplan 13y ago
For anyone trying to determine how they can help: make a phone call. Politicians care about phone calls infinitely more than tweets or Change.org signatures. If enough people call the DoR (617-887-MDOR) and their MA representative with complaints, it's very possible that something could change.
IanDrake 13y ago
I live in Mass, but my consulting company is in CT. My current client is in MA and I do some work for them on site. I read the law and best I can tell, I don't qualify for this. It seems to be centered around "pre-written" packaged software. I'm writing it right now, so how can it be "pre-written"? I won't pay this tax until I hear a valid argument that doesn't start with "Well, to be safe...". I'm not paying the state protection money to be safe from vagueness of their laws.
- loumf 13y ago
  If you are writing totally custom software, you are exempt (IANL -- but, it's pretty clear in the FAQ). If you customize pre-written software, you might have to collect/report tax (that's where it's vague what customize exactly means). Using a library isn't customizing, according to the FAQ -- as long as the work done to use it is < 10% of the total project. So, if you take 5 months to write an iPhone App, then you need some library, and you download it and add it to your project in 2 days, you are ok. If you were worried, you could line-item it out and charge tax on just that work.
  - randomdata 13y ago
    iPhone development, and application development in general, essentially is near 100% interfacing with libraries though. Even if you can add a new library to your project in two days, that work most certainly will be to tie the new library to the existing libraries that you have been building upon from the start (the iOS SDK, in this instance), and thus that work would theoretically still not be exempt. Sounds like a complicated mess.
    - loumf 13y ago
      Interfacing with iOS frameworks is exempt. It's the third-party (not you, not the OS), pre-written software that matters. My experience is that that is no where near 10% of the work. If it is for your specific custom app, you should line-item the work out. In this case, if you are audited, they said they are looking for a "good-faith" estimate -- your source-code repository and history of checkins are a journal of this that is much better than anyone would ever have. I would recommend keeping the integration somewhat isolated so that it can easily be compared to the whole. If you are using PhoneGap or some other application framework, then as the law is written, I think the whole thing is taxable. I think there is a good chance that this part may be amended -- if you are in MA, please write the DOR about this case (I already have). Email rulesandregs@dor.state.ma.us -- just set up the situation and ask the question -- they will use it pretty much verbatim in their FAQ.
thwest 13y ago
Another reason to license software not sell it.
magoon 13y ago
Boston's own implementation of the Tea Act, only 240 years later...
cindaydavilla 13y ago
my classmate's ex-wife makes $63 an hour on the laptop. She has been without work for seven months but last month her check was $18401 just working on the laptop for a few hours. Read more here... max38.cℴm
JackFr 13y ago
One of the extremely tough things about pension liabilities, is that they are costs with present benefit -- they a labor costs from labor performed decades ago. As a state, you cannot even expect that the pensions paid will be spent in your state. Since theses are typically states or municipalities they lack the sovereign ability to print money, and they face the problem that it is relatively easy (versus a nation state) to leave their taxing jurisdiction. This is especially true especially with income tax increases -- those most impacted are also those with the greatest mobility. That is why the Federal government's response to the Detroit bankruptcy is so important. Are the rest of us going to be on the hook for the unfunded munis or not?
mkramlich 13y ago
I'm trying an extreme version of "skate where the puck is headed, not where it's at" with respect to taxes. In my free time I've started designing a tax system which has the potential to be radically simpler, more fair and automated than the current kinds of systems in place. It's fairly obvious than the existing systems are overly complex, unfair, burdensome compliance-wise, confusing and rife for abuse.
blahedo 13y ago
Holy crap, everyone here needs to take a deep breath. And, preferably, look at the law itself (not just this article). Despite the author wringing his hands and clutching his pearls about how this law is soooooo hard to understand, it's really not that complicated. It's a sales tax. It works like sales taxes tend to work, with similar distinctions between industrial product (sold as a good) and bespoke construction (sold as a service), and with similar handling of inter-state purchases (if you have a nexus in MA and sell to someone there, you collect, and if you don't have a nexus in MA, they're responsible for use tax). Let's not mistake the fact that people don't like taxes for some sort of deep, abiding flaw in the legal situation. (Now, the complaint that implementation was too sudden, that's totally valid. They should have had a several-month gap between passing the law and the tax kicking in.)
- loumf 13y ago
  I am generally sympathetic to this point of view -- I am not against sales taxes, and as someone who has been in shrink-wrapped software for most of my career, I've had to deal with sales tax pretty much forever (and it's not a big deal, unless you have to deal with WA's per county rules) In this case, though, they are charging sales tax on some services (that's what the law is about). It has to do with services tied to "goods" or pre-written software. So, integrating, customizing, installing, etc. I believe that this is the area that might get amended or clarified soon (I have written the MA DOR about it, as I know many have). They need to clarify the line between bespoke and pre-written but customized a little better. Also, I've heard a few time (but don't know if it's true) that this law is modeled on laws in 24 states. If true, then a lot of people on this list are probably supposed to be dealing with this already.

205 points by neilkelty 13y ago

dccoolgai 13y ago

This is surely one of the most irresponsible pieces of legslation nywhere this decade.

velodrome 13y ago
They should create a tax for lawyers. They are far less productive than engineers -- all they do is argue all day and not create anything of value.
- tomjen3 13y ago
  Tax politicians, they are completely useless.
- DannyBee 13y ago
  Uh, you have a strange view of 1. what the average engineer does all day 2. What the average lawyer does all day Most lawyers spend time working on client's problems, not "argue all day". Lawyers bill their time often in 5 minute increments, and only charge for time they are actually doing something. If the average engineer sat down and tracked what they did every 5 minutes of the day, i think you'd find they are a lot less productive than they think.
  - velodrome 13y ago
    In California, lawyers bill hourly and in the $300-400/hr range. But your right, we should look to Congress because they are actually quite productive. Majority of them have a background in political science and law. http://www.fas.org/sgp/crs/misc/R42365.pdf http://www.fas.org/sgp/crs/misc/R42365.pdf http://www.senate.gov/CRSReports/crs-publish.cfm?pid=%260BL%2BR%5CC%3F%0A http://www.senate.gov/CRSReports/crs-publish.cfm?pid=%260BL%...
    - DannyBee 13y ago
      All lawyers have an hourly rate, the question is the minimum time unit they charge for. I'm not sure what congress has to do with any of this. I could point out engineers doing plenty of evil unproductive and wasteful things too (malware, fart apps, NSA surveillance applications, whatever), but much like your original complaint, it's just character assassination
      - velodrome 13y ago
        It is clear your a lawyer of some kind. I am not trying to demean your profession or others who practice law. I was using role reversal to make a point. I should have used "legislator" instead. So, I apologize for that. The decision-makers are mostly comprised of people with a background in law. Why is it fair to pass a law for taxing software development but not taxing the act of practicing law? I just think it is unfair for legislators to protect their professional occupation at the expense of others. There clearly needs to be more diversity among people who hold public office. As for unproductive engineers - sure, there are plenty. The same applies to all other professions. However, it is hard to argue against the progress made by STEM fields over the last few centuries.
- consz 13y ago
  >They are far less productive than engineers -- all they do is argue all day and not create anything of value. Proof? This is worthless of a statement as "[Lawyers] are far less productive than engineers -- all they do is read reddit all day and not create anything of value."
  - velodrome 13y ago
    STEM, by nature, makes people more productive. Wheel, Bicycle, Train, Car, Airplane. The more productive people are, the more wealth can be generated. http://www.fas.org/sgp/crs/misc/R42530.pdf http://www.fas.org/sgp/crs/misc/R42530.pdf http://www.myvisajobs.com/Reports/2012-H1B-Visa-Category.aspx?T=OC http://www.myvisajobs.com/Reports/2012-H1B-Visa-Category.asp...

velodrome 13y ago

It's a great way to drive that particular business out of the state. If they apply this tax towards STEM education, then the benefit might be worth it.

MetaCosm 13y ago
You understand that if it drives the business out of state, there is no benefit, no upside. There is no money to go towards STEM, and if the states general economy goes down over it -- it is a net-negative on STEM.
- velodrome 13y ago
  I was just pointing out: if they had no choice, then apply it towards growth instead of some sinkhole project. But yes, it is a net negative....I just don't understand why they would do this. They should be offering incentives to stay there. This is a self-invoked brain drain.
- tomjen3 13y ago
  Bull there will be a huge benefit - the lost business will no longer have to suffer under the idiocities of the Mass. government.
- deleted 13y ago
  [deleted]

chiph 13y ago

What a mess. At this point I'm not inclined to sell to anyone in the state.

MetaCosm 13y ago
Which is really annoying if you have existing clients in the state. It is really poorly worded and confusing, my tax attorney has no idea where our work product falls tax wise.
dsr_ 13y ago
It only applies to you, the seller, if you are located or have an office in Massachusetts.
- acomar 13y ago
  > Anyone working in the IT industry who sells software or related services to any business that has any office in Massachusetts. So no, it applies if your client is located in the state.
  - mjn 13y ago
    It doesn't (and can't, unless Congress changes the law) override the basic requirement that Massachusetts can only require you to collect sales tax if you have a Massachusetts nexus establishing jurisdiction. However if you are 1099 consulting for an MA client, in many cases that will establish an MA nexus, so this will apply to many consultants who have MA clients. On the other hand if you purely operate a website where people can purchase software or hosted services with a credit-card, and you have no MA presence, merely having customers from MA won't establish an MA nexus.
    - antihero 13y ago
      What if I'm in the UK? Am I going to get extradited?
    - yourapostasy 13y ago

pkmehta 13y ago

This is going to increasingly become common esp as governments try to cover budget gaps. We just went through a sales tax audit for our SaaS company and so are expecting a good size bill for taxes not paid + penalties. Yes - fun stuff. Honestly, the gov't folks are playing whack-a-mole here trying to keep up with fast-growing areas that don't fit the old "you sell this widget for $X" model they're used to. And so they're going to write overly broad rules as they don't understand technology and related industries. There is no intrinsic reason that SaaS should be free of tax and so the more worrying aspect of this legislation (NY has similar) is that it is so difficult to understand and open to interpretation and the mental tax it imposes on businesses who live in a cloud of of uncertainty about how they should treat their revenues. That said, I think the idea that it will drive biz out of the state is naive. California is not a particularly biz friendly state in terms of taxes but the Valley and even LA seem to be doing just fine.

MetaCosm 13y ago
I stopped working with a client already over this. Simply put, cash-flow wise I can't currently risk taxes and penalties. It turned a customer into a liability because of the horrible wording and unclear guidance (seriously, they want us to pro-rate by the % of our software used in the state?). I suspect many other small start-ups will make the same choice we did until this all gets sorted out.
- grumps 13y ago
  Out of curiosity - what made you feel that burden was placed on your company? From what I saw if you didn't have a MA tax ID and didn't have a physical presence in the state that burden would be placed on the purchaser. Personally I read that it's kind of like sales tax, and buying online. If the seller doesn't do business in the state you reside it's up to the purchaser to pay the tax.
  - MetaCosm 13y ago
    My lawyer was unable to assure me of this -- the law is terribly written. Due to the nature of the data worked on, I have to travel to MA and do a major component of the work on site. My understanding is "rewording and clarifications" are coming. I know my client (employes hundreds of people) has unleashed a bit of hell over this -- we will see what will happen.

skrebbel 13y ago

Wow, so if I run a SaaS from, say, the Netherlands, I'm going to have to pay Massachusetts some kind of extra income tax? What if I don't even know where my customers reside? The US just became a little more EU. Congratulations! EDIT: I meant 'import tax' where I wrote 'income tax'. Sorry for the confusion.

kalleboo 13y ago
It only applies if your company has a physical presence in Massachusetts (shop or office). State taxation is the same reason Amazon avoid putting warehouses in certain states, since it means they have to start collecting sales tax on everyone in that state. As long as they stay out of the state and do all their dealing across borders, they're don't have to collect the sales tax.
mjn 13y ago
It's not an income tax, it doesn't apply to hosted services, and it doesn't apply to companies not doing any business in Massachusetts. The people this impacts are those currently consulting for MA clients in a capacity that was not considered software sales previously, but now might be. For example, if you sold an analytics package in boxed software, that was always clearly a "sale" and is unchanged. But if your business is based around, for example, having a free SaaS analytics service, along with an offer that enterprise clients can pay you to get a self-hosted version installed on their own servers, that has typically been treated as consulting in MA, but is being reclassified as selling software. The theory is that you are basically selling software (a copy of the analytics package), not really consulting, and the fact that you didn't put it in a box with a bar code is irrelevant. The complaints are largely based around the vagueness of the definitions and the short notice of implementation.
metaphorm 13y ago
sales tax, not import tax. the tax is implied internally as well, not only to transactions from foreign businesses.

brokenmusic 13y ago

Until people realize that all taxes are theft, they're doomed to have new taxes imposed on the most productive of them. It's really a simple test to see whether taxes are theft or not: if there was no way for IRS to find out how much money anyone made, would people still be paying taxes? My guess is that 90% of people who preach about the social contract and helping the poor would keep the money.

dreamdu5t 13y ago
The fact that taxes are operational theft is why taxes that affect everyone are seldom passed. Specific industries or products are targeted because there's less resistance. For example, many people will sneer at this tax yet cheer on other taxes they don't have to pay.
crazygringo 13y ago
If taxes are theft, then your use of roads, police, courts, eating at restaurants approved by health inspectors, and much more -- that's all theft of your own. Sorry, but taxes are not theft in any general way, by any stretch of the imagination.
- thallium205 13y ago
  It takes some seriously deep-seeded, institutionalized indoctrination assaulting your mind through most of your life to believe taxation is not theft. If you do not pay your tax, violence is threatened and will be brought upon you if you do not comply. This is theft. It does not matter if the thief uses it for altruism. It does not matter if the thief forces roads and other services upon you by outlawing competition. The fact remains that the initiation or even the threat of violence against an otherwise peaceful person is wrong, and trying to argue otherwise is an indefensible position.
  - marvin 13y ago
    You are free to go off-grid and live in the woods, free from the shackles of taxed services like roads, police protection and tap water. If you still make enough money to pay tax, you'll still technically be breaking the law - but I doubt anyone is going to come into the forest to put you in jail. So in practice you'll be free and clear. You could also go to a nation in sub-Saharan Africa where there is in effect no government. No taxes! Except for the armed bandits which will take away all your stuff. But surely you can pay out of pocket for a professional defense force to take care of that problem.

asmithmd1 13y ago

I don't understand how they singled out software developers. Why not lawyers or landscapers or pool service. Why not tax something that no one likes that can't move out of state - TV and radio ads?

deleted 13y ago
[deleted]
chalst 13y ago
What makes you think this only applies to software developers? I provide editorial and publishing consulting - I don't write code to sell, but I do configure and patch other people's code. Am I covered by this law? Well, I guess I am. Easiest solution for me: don't accept clients in Massachusetts.
- grumps 13y ago
  If you don't have physical ties to the state, I believe it isn't your problem, it's theirs, then again I'm not a lawyer or an accountant.
- troels 13y ago
  Oh you can accept them alright. Just recharge the extra tax to the customer, if they're from MA. You don't even need to worry about if it applies to that particular invoice or not - Just add it in any case.
  - Daniel_Newby 13y ago
    Assessing a fee under false color of law is a serious crime.
    - troels 13y ago
      I wouldn't suggest that you keep the funds for your self. You could just pay it through in any case - I'm sure the MA tax department wouldn't mind. And I would also assume that to be a lawful practise. The point is that you make it clear why your customers are being charged extra. It's then up to them to contact their local representatives and ask them to change the law. If you're not based in MA, it's not really your problem. Sucks for businesses in MA of course.

dsr_ 13y ago

MA resident. The biggest problem with this is the timing: tell us in July that it goes into effect on January 1, we can deal. Tell us it goes into effect in a week? Hah.

loumf 13y ago
That and the fact that the line between custom software and customizations of pre-written software isn't very clear (or if clear, draconian). The way they wrote it, a custom WordPress template sounds like a customization (therefore taxable), but a site not hosted in a CMS is custom (non-taxable).

rayiner 13y ago

Unfortunately Mass. has unfunded pension liabilities exceeding $20 billion (not including municipalities), and unfunded health care liabilities exceeding $45 billion (including municipalities. At the same time, states will have to deal with the new normal, which is lower economic growth indefinitely and lower returns on invested assets. As a result, states will ratchet up taxes to cover their increasingly untenable budgets, as we've seen in Illinois (which recently almost doubled its state income tax) and Mass. My guess is that this process will accelerate the internal migratory trends that are already in place. E.g. Nebraska, which banned defined-benefit pensions in the 1960's is sitting pretty with $43 of unfunded liabilities per person. Relevant to tech, the following states have big research universities (and thus a supply of educated workers) and also relatively manageable unfunded liabilities: Pennsylvania, Michigan, Wisconsin, Texas, and North Carolina: http://www.nasra.org/resources/Moodys1101.pdf http://www.nasra.org/resources/Moodys1101.pdf.

mjn 13y ago
I don't disagree with the macro point, but if you don't like this particular tax, Texas would be a poor choice of alternatives, because it already applies sales tax to an even broader class of software services than MA is now doing. For example, even hosted services like SaaS are covered under the Texas taxable-services definition, in cases where Texas has sales-tax jurisdiction (e.g. your business has an Austin office, and you have clients in Houston). See section Data Processing Services here: http://www.window.state.tx.us/taxinfo/taxpubs/tx96_259.pdf http://www.window.state.tx.us/taxinfo/taxpubs/tx96_259.pdf Examples of data processing include ... 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... . Data processing services providers include sellers of software as a service and application service providers. That would, for example, mean that a service like Tarsnap or Heroku would be subject to Texas sales tax, if they had a Texas nexus for sales-tax purposes, which isn't the case in Massachusetts even under the new law.
- arohner 13y ago
  I disagree, because in Texas, the sales tax is significantly more clear who is affected. "You have an office in Texas, you pay tax" is pretty simple.

tehwalrus 13y ago

This is insane. Either add a sales tax (fixed %) to all B2B transactions (like UK VAT, which you're exempt from if you're tiny) or just don't. This minefield of regulations about what's taxable and what isn't will just make it much more expensive to sell things, as people pay for lawyers/accountants to figure out what "tax" to add to every outgoing invoice. Since this will decrease consumption, it will reduce other tax revenues, as well as making this pot smaller. Mad. Stark Raving.

neltnerb 13y ago
Agreed. I run a small business (thankfully not doing software) in Massachusetts. I don't mind collecting sales tax, but when they make it an overhead nightmare it's impossible to figure out. I'm just one person; when your revenues are in the $10k range, hiring someone to figure it out is impossible. If they just charged a fixed rate for everything it would at least not so heavily favor big business over small companies. I'm also confused because it seems that most of the reasoning is that companies sell the software for cheap and then make the service contract expensive. I've seen this done by companies like Autodesk and National Instruments for sure, so I can see why they'd dislike it. I design custom equipment, and I'd be tempted to do the same (charge at close to cost for equipment and charge as a service for labor). But this seems like an incredibly poorly conceived way to fix the problem that will cause more issues than it will address, and it's surely not limited to software. I could pull the same trick in any kind of contract work.
- mvc 13y ago
  > software for cheap and then make the service contract expensive If the software is cheap, it is expensive to service it.
  - pc86 13y ago
    I know what you're saying, but I think his point was if you spend $100k developing software, sell it for $100 and sell service contracts for $10k instead of selling it for $5k with a similarly priced service contract.

hqsavvy 13y ago

I ran a consulting business in Ontario Canada from 1999-2004 Today the provincial sales tax is included (harmonized) with the federal sales tax as the HST (8% + 5% = 13%) but back then they were charge separately as PST and GST. Each tax act treated software and software services differently. When we started we were compatriots with many such contractors in the city. They said, confirmed by our accountant, that our services were not PST eligible so we collected and submitted only the federal GST. This we did for 5 years without any incident; like an audit from the province. In 2004 our business failed and we were in the process of closing up shop when the feds audited our GST history and found that in 2001-2004 our GST submissions were off and we owed about 30k incl interest and files. We made arrangements to pay the bill. Painful but under control. But, the federal audit triggered a provincial audit and that's when we discovered that the rules for PST regarding software/it services had changed during our run, making the work we did subject to the 8% PST. The rules for that are eerily similar to those described in the OP. The provincial government determined that the changes to The Act were retroactive and covered all the business we ever did and that with interest and penalties we owed over 700k payable by the end of that week or they would take action. The company was broke so he action we were threatened with was that, as officers of the company, we were personally liable for the amount and that if not paid by the end of the week, our personal bank accounts would be frozen. This was not good. Further we found out that at that time, these rules were only enforced when a PST audit occurred. So, when we told the many contractor pals in town that this could be a problem for them. a) they didn't believe it, and b) AFIK none of them changed their practice of collecting only the GST. Anyways, there was a loophole where a customer could assume the liability for the PST by giving us a waiver form. Luckily the majority of our work was with one customer, a huge corp, who agreed to do this and we were off the hook. It was a very stressful week. PS. I have not done any consulting since 2004 so I am not aware of any subsequent changes to The Act. AFIK, none of the contractors I know were dinged the way we were. I figure that harmonization of the taxes means they are collecting tax for both govt entities now.

hqsavvy 13y ago
PS. Our Errors and Omissions insurance did not cover the tax bill
13y ago

6d0debc071 13y ago

I wonder whether you can just 'give away' the free upgrades and the like and charge a standard consulting fee with the operation that folds the price into it.

nighthawk24 13y ago

This is definitely going to backfire. Stuff will be outsourced. The state should provide incentives to the best of IT crowd.

patio11 13y ago

And it’s not just Massachusetts developers that have to deal with this. It’s anyone who has clients who have “software” that is being “used” in Massachusetts. Talk to your lawyer if you doubt me on this one, but Quill vs. North Dakota means that it is the well-settled law [+] of the United States that you cannot be liable for sales or use taxes enacted by a state which you don't have a "nexus" in. What exactly constitutes a "nexus" can be hazy, but the punchline for the overwhelming majority of HNers is that if you do not have an employee who performs work for you within Massachusetts you almost certainly do not have a nexus there. Theoretically HN users who are also Massachusetts residents will have to start remitting use tax to the state to cover purchases of covered which they made from out-of-state merchants. It is an open secret that compliance in the US with use taxes is nearly zero. + Well, until they pass that threatened Internet tax legislation.

mjn 13y ago
> the punchline for the overwhelming majority of HNers is that if you do not have an employee who performs work for you within Massachusetts you almost certainly do not have a nexus there If you're a consultant who does work on-site for an MA client, that may also establish a nexus. In some cases it can do so even if you don't physically travel to MA, since the services can be deemed to have been rendered in the client's location. But others are deemed to have been rendered in the consultant's remote location. It's a little conceptually (and legally) unclear where remote services "happen", and seems to depend on the state and the service and the precise consulting relationship.
- will_work4tears 13y ago
  Conventions that are work related and you work at a both promoting your work or products counts as well it seems. I had a client that went to Vegas several times a year for a convention and just running a booth made Vegas a nexus for him.
grumps 13y ago
I just scanned the FAQs from the MA DOR. Seems one should avoid having any physical presence in the state of MA. Avoiding the Physical presence would require the client to handle the burden of the tax.

coldcode 13y ago

As I said before when this came up, the only thing that will cause politicians to change the rules is money. As in abandon the state entirely so they don't get anything. Move away, change your business, whatever it takes and then let the politicians (and the public) know why you are giving up on them. Sure it's painful but that's the only thing that gets the attention of the idiots in charge.

jpmattia 13y ago

> [Mass. DOR FAQ] It doesn’t matter where you host the information. If the business you’re working for has offices in Massachusetts, you have to collect tax. Sounds like the solution is pretty obvious. And I doubt anyone will miss Boston winters.

psi_rockin 13y ago

Although it's certainly obnoxious and poorly thought out, in the long run we development shops will get all the edge cases figured out, though dealing with the legislature is going to be like pulling teeth. Although it would increase startup costs and decrease ROI for us, let's not forget who actually pays this tax: our clients, the buyers of these services. If you are a Massachusetts company and you buy technical services, you now have a really strong incentive to head north to New Hampshire or south to Rhode Island. Massachusetts is also small enough that you might be able to pull that off without losing too many employees.

bhickey 13y ago
If you're looking to minimize your taxes, Rhode Island is a poor choice. Property tax in Providence is $33.75 per $1000 ($19.25 for owner-occupied property) levied on 100% of the assessed value. On top of this, the state has a huge unfunded pension liability and municipal benefits liability (~$2.3bn). State employees and teachers benefits add up to another $7bn. When the other shoe drops, the money is going to come from somewhere or the state will go bankrupt.

yahelc 13y ago

Is there a reason this article doesn't mention what the actual tax rate is? According to other articles, it's 6.25%, but that omission from this article seems glaring. Is it because that number is perceived as low, and mentioning it undermines the argument of how dire opponents think it is? (Genuinely asking, not trolling; my employer is almost certainly going to be hit by this tax.)

mjn 13y ago
I think it's not mentioned because it's not a separate tax with its own rate, but a change in what categories of transactions sales tax applies to. Therefore the rate is just the regular sales-tax rate. The controversy is over what should be covered by sales tax more than the rate.

crazygringo 13y ago

I can't find the link to the previous HN thread about this (and Google isn't helping), but someone had posted that the whole point of this tax was to essentially close a loophole where normal software sales are taxed, but a consulting firm who makes a tiny tweak and sells the software under "consulting services" because they "install a solution" for the client, doesn't charge sales tax. So if that's accurate, it makes perfect sense. Of course, crafting a law that actually targets this and this only is extremely hard to do, and the short notice here is ridiculous. But if that's the actual motivation behind the law, it's just a case of where do you draw the line between selling products (taxed) and selling services (not taxed)? Of course there's a gray area between them.

techiferous 13y ago
The motivation of the law is to raise revenue for transportation, not close a legal loophole.
ars 13y ago
> but a consulting firm who makes a tiny tweak and sells the software under "consulting services" because they "install a solution" for the client, doesn't charge sales tax. Then the consulting firm would pay the sales tax when they buy the software (before tweaking it).

Vivtek 13y ago

I like this translation of the FAQ into plumbing and carpentry services as an analogy that makes things easier to understand for non-software people (especially the one about RV plumbing that makes it clear that the buyer is liable for use tax for all use of the RV's plumbing within Massachusetts). http://repealtheitservicetax.com/2013/08/02/plumbing-and-carpentry-service-tax-parody/ http://repealtheitservicetax.com/2013/08/02/plumbing-and-car...

rkaplan 13y ago

For anyone trying to determine how they can help: make a phone call. Politicians care about phone calls infinitely more than tweets or Change.org signatures. If enough people call the DoR (617-887-MDOR) and their MA representative with complaints, it's very possible that something could change.

IanDrake 13y ago

I live in Mass, but my consulting company is in CT. My current client is in MA and I do some work for them on site. I read the law and best I can tell, I don't qualify for this. It seems to be centered around "pre-written" packaged software. I'm writing it right now, so how can it be "pre-written"? I won't pay this tax until I hear a valid argument that doesn't start with "Well, to be safe...". I'm not paying the state protection money to be safe from vagueness of their laws.

loumf 13y ago
If you are writing totally custom software, you are exempt (IANL -- but, it's pretty clear in the FAQ). If you customize pre-written software, you might have to collect/report tax (that's where it's vague what customize exactly means). Using a library isn't customizing, according to the FAQ -- as long as the work done to use it is < 10% of the total project. So, if you take 5 months to write an iPhone App, then you need some library, and you download it and add it to your project in 2 days, you are ok. If you were worried, you could line-item it out and charge tax on just that work.
- randomdata 13y ago
  iPhone development, and application development in general, essentially is near 100% interfacing with libraries though. Even if you can add a new library to your project in two days, that work most certainly will be to tie the new library to the existing libraries that you have been building upon from the start (the iOS SDK, in this instance), and thus that work would theoretically still not be exempt. Sounds like a complicated mess.
  - loumf 13y ago
    Interfacing with iOS frameworks is exempt. It's the third-party (not you, not the OS), pre-written software that matters. My experience is that that is no where near 10% of the work. If it is for your specific custom app, you should line-item the work out. In this case, if you are audited, they said they are looking for a "good-faith" estimate -- your source-code repository and history of checkins are a journal of this that is much better than anyone would ever have. I would recommend keeping the integration somewhat isolated so that it can easily be compared to the whole. If you are using PhoneGap or some other application framework, then as the law is written, I think the whole thing is taxable. I think there is a good chance that this part may be amended -- if you are in MA, please write the DOR about this case (I already have). Email rulesandregs@dor.state.ma.us -- just set up the situation and ask the question -- they will use it pretty much verbatim in their FAQ.

thwest 13y ago

Another reason to license software not sell it.

magoon 13y ago

Boston's own implementation of the Tea Act, only 240 years later...

cindaydavilla 13y ago

my classmate's ex-wife makes $63 an hour on the laptop. She has been without work for seven months but last month her check was $18401 just working on the laptop for a few hours. Read more here... max38.cℴm

JackFr 13y ago

One of the extremely tough things about pension liabilities, is that they are costs with present benefit -- they a labor costs from labor performed decades ago. As a state, you cannot even expect that the pensions paid will be spent in your state. Since theses are typically states or municipalities they lack the sovereign ability to print money, and they face the problem that it is relatively easy (versus a nation state) to leave their taxing jurisdiction. This is especially true especially with income tax increases -- those most impacted are also those with the greatest mobility. That is why the Federal government's response to the Detroit bankruptcy is so important. Are the rest of us going to be on the hook for the unfunded munis or not?

mkramlich 13y ago

I'm trying an extreme version of "skate where the puck is headed, not where it's at" with respect to taxes. In my free time I've started designing a tax system which has the potential to be radically simpler, more fair and automated than the current kinds of systems in place. It's fairly obvious than the existing systems are overly complex, unfair, burdensome compliance-wise, confusing and rife for abuse.

blahedo 13y ago

Holy crap, everyone here needs to take a deep breath. And, preferably, look at the law itself (not just this article). Despite the author wringing his hands and clutching his pearls about how this law is soooooo hard to understand, it's really not that complicated. It's a sales tax. It works like sales taxes tend to work, with similar distinctions between industrial product (sold as a good) and bespoke construction (sold as a service), and with similar handling of inter-state purchases (if you have a nexus in MA and sell to someone there, you collect, and if you don't have a nexus in MA, they're responsible for use tax). Let's not mistake the fact that people don't like taxes for some sort of deep, abiding flaw in the legal situation. (Now, the complaint that implementation was too sudden, that's totally valid. They should have had a several-month gap between passing the law and the tax kicking in.)

loumf 13y ago
I am generally sympathetic to this point of view -- I am not against sales taxes, and as someone who has been in shrink-wrapped software for most of my career, I've had to deal with sales tax pretty much forever (and it's not a big deal, unless you have to deal with WA's per county rules) In this case, though, they are charging sales tax on some services (that's what the law is about). It has to do with services tied to "goods" or pre-written software. So, integrating, customizing, installing, etc. I believe that this is the area that might get amended or clarified soon (I have written the MA DOR about it, as I know many have). They need to clarify the line between bespoke and pre-written but customized a little better. Also, I've heard a few time (but don't know if it's true) that this law is modeled on laws in 24 states. If true, then a lot of people on this list are probably supposed to be dealing with this already.