Bay State’s new software tax just doesn’t compute

Aug 6, 2013Council in the News, The Springfield Republican

Imagine a Massachusetts-based company that performs work on computer software, sometimes for in-state firms, at other times for companies headquartered elsewhere.

Imagine further that this hypothetical software services operation has not a few employees who work from home – some of them in Massachusetts, others across the border in New Hampshire.

Now, consider a new state tax on software services suddenly going into effect.

How would the tax apply to work done for an out-of-state company if it was performed from home by an employee living in New Hampshire? And what if she did some of the work from home and some from the company’s Bay State office? What if she did all of it from home, but her work was later ported to the offices of a company with its home base in Massachusetts?

It’s ridiculously complicated, isn’t it? And, for some folks, it isn’t merely something to imagine – it’s real life.

To name but one, Carl Rubin, managing partner of Monument Data Services in Needham, finds himself in exactly this position.

It’s a glaring example of what’s wrong with the Bay State’s new tax on software services. It took effect last week, along with increases in the state’s taxes on gasoline and cigarettes. But unlike those levies, which are straightforward, simple, clearly understood, the software services tax is a boondoggle wrapped in an enigma.

Though the tax went into effect last week, some of the details haven’t even been worked out yet.

Not to worry, says the Legislature, we’ll have it all figured out in October. And, in the meantime, software companies are supposed to do what, exactly?

We understand the need for revenues, for tax adjustments from time to time. But not this.

Perhaps there’s a good reason why no other state in the nation has such a tax – because it just doesn’t compute.

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 the resiliency and long-term strength of the Massachusetts economy.

To learn more, contact Chris Anderson.