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Proposed Sales Tax on Computer and Data Processing and Custom Software Opens Pandora’s Box

Mar 18, 2013 | Other

Massachusetts Taxpayers Foundation

The proposal to tax computer and data processing services and custom software is a Pandora’s box, raising numerous problems for virtually all businesses in the state, large and small, and seriously undercutting the state’s competitiveness.

A new tax on widely used technology will add to the costs for virtually every business in the state, including professional service firms, technology companies, and many other businesses that provide residents with good, high-paying jobs. The proposal threatens to tax everything from the most basic technological services—for example, designing a custom website—to emerging innovations like health care diagnostics on mobile devices.

Companies of all sizes rely on technology to improve and grow, and taxing it would add to their costs of doing business. Massachusetts already has the second highest business costs in the country, behind only Hawaii.1 The state’s tax burden on businesses is the fifth highest in the country, according to the January 2013 report from the Greater Boston Chamber of Commerce. The state also ranks near the bottom for its difficult regulatory climate. Since so few other states have a similar tax, it would be one more factor that makes Massachusetts the most expensive place in the 48 contiguous states to run a business.

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