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High Tech Tax Bugs Business

Aug 8, 2013 | Attleboro Sun Chronicle

NOTE: “Massachusetts has a very strong technology economy with the highest percentage of technology workers in the country,” said Chris Anderson, president of the Massachusetts High Technology Council.

“Our goal is to create more jobs in the commonwealth. This policy puts a new burden on job growth.”

He said Massachusetts taxing computer services is like Florida taxing oranges.

Anderson said he would like to see the Legislature repeal the tax, but is preparing a petition drive to get the question of repeal on the 2014 state election ballot so voters can decide the matter.

By Jim Hand
ATTLEBORO SUN CHRONICLE

Ray DiCiaccio runs a computer service company in Attleboro, and he admits he is unsure how a new state computer-service tax affects him and his customers.

He said he has been trying to read up on the tax that took effect July 31, but everything is still vague and ill defined.

“Part of me says, ‘Do I have to start charging for this?'” he said.

“It’s very vague right now.”

Brian Sullo runs a larger information technology company in Franklin and has some idea of what it means, but is no less unhappy about it.

He said the new law is extremely complicated, will hurt the technology industry in Massachusetts and will make his job a lot more difficult.

Sullo said his Clocktower Technology Services charges his small and medium-size business customers a flat monthly fee for providing support services for their computer networks.

Under the law, however, some of the services he provides must be taxed, while others are exempt.

He said his company will have to engage in the “administrative nightmare” of separating out the services and charging customers by the hour so he can impose the tax on them.

The problem is, he said, the taxable and nontaxable services are often intertwined.

Troubleshooting a computer is nontaxable, but installing “patches” that update software and help determine what the problems are must be taxed, he said.

Business groups are so unhappy with the new tax that Wednesday they launched a campaign to repeal it.

They said the problems go beyond the confusion over what is taxable.

Taxing computer services and software will put a crimp on Massachusetts robust high technology sector, dampen job growth and encourage businesses to contract with out-of-state software companies.

“Massachusetts has a very strong technology economy with the highest percentage of technology workers in the country,” said Chris Anderson, president of the Massachusetts High Technology Council.

“Our goal is to create more jobs in the commonwealth. This policy puts a new burden on job growth.”

He said Massachusetts taxing computer services is like Florida taxing oranges.

Anderson said he would like to see the Legislature repeal the tax, but is preparing a petition drive to get the question of repeal on the 2014 state election ballot so voters can decide the matter.

The 6.25 percent sales tax was approved by the Legislature as part of a $500 million package that included a 3 cent increase in the gasoline tax aimed at funding transportation projects.

Lawmakers were trying to address chronic deficits in the MBTA budget, transportation debt and roads and bridges that had fallen into disrepair.

But, Michael Widmer, president of the Massachusetts Taxpayers Foundation, said the computer tax has nothing to do with transportation.

If the Legislature needed more money for transportation issues, it should have raised the gasoline tax by 8 cents per gallon, rather than 3, he said.

The computer tax will hurt the every industry Massachusetts relies on for good-paying jobs, he said.

“This tax is a disaster for Massachusetts,” he said.

Another problem, he said, is that the Legislature has greatly underestimated the impact of the tax.

Lawmakers estimate the tax will bring in $161 million a year. Widmer said his group believes the tax is far more expansive and will cost taxpayers $500 million annually.

The state Department of Revenue is expected to issue regulations regarding the tax this fall, but the tax has already taken effect.

Opponents said the Legislature should at the very least delay its implementation until the state can clarify how it is going to work.

Leaders of Massachusetts’ Innovation Economy

Leaders of Massachusetts’ innovation economy have much to accomplish in the next few years.

The Council distinguishes itself by specializing in complex, multi-year public policy strategies in support of conditions that protect and enhance a strong Massachusetts economy.

Learn more, contact Bernie Prusaczyk.

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