Massachusetts Computer Services Tax Riles IT Industry - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

IoT
IoT
Government // Open Government

Massachusetts Computer Services Tax Riles IT Industry

Proposed 6.25% sales tax on certain computer and software services would slow innovation and hurt the state's tech industry, opponents say.

Massachusetts' legislature has proposed imposing a 6.25% sales tax on computer and software services. Opponents of the bill say the new tax would negatively affect the state's technology industry, create a drag on innovation and hurt other industries and businesses that use these services.

The tax is part of a transportation bill meant to address the Massachusetts Bay Transportation Authority's budget deficit. The bill was adopted by the House of Representatives on July 17 and by the Senate on July 18. It initially passed in June, but Massachusetts Governor Deval Patrick returned it to lawmakers in a dispute over toll revenue. If enacted, the legislation would enforce a 6.25% sales tax on certain computer and software services in the state.

The stakes could be significant. Massachusetts is the sixth-largest tech employer in the U.S., and 9% of the state's private sector talent works at tech firms, according to industry trade group TechAmerica.

[ Former Department of Transportation CIO Nitin Pradhan shares his 5 Habits Of Highly Effective Government IT Leaders. ]

The tech industry, however, had been slow to challenge the proposed tax, according to Senator Stephen Brewer, who chairs the Senate Committee on Ways and Means. "We heard precious little from industry," he told the Boston Globe.

That's changed in recent days as opponents have challenged the bill, arguing that it would put the state at a competitive disadvantage.

TechAmerica issued a letter to members of the Massachusetts General Court asking to "fix the computer system design services tax so that Massachusetts can maintain -- if not strengthen -- its place as a leading high-tech state."

"While we understand the need to fund critical transportation infrastructure projects, there must be careful consideration of the impact that new taxes pose on businesses. [The tax] does not strike that balance and punishes businesses -- particularly the technology sector," Kevin Callahan, TechAmerica's director of state government affairs for Massachusetts, said in the letter. "The purpose of the tax is to increase state revenue; however, driving business out of Massachusetts would ultimately have the opposite result."

Callahan also contended that the effects would be felt not only by the IT sector, but many other industries as well, including retailers, restaurants, banks and healthcare providers. Consumers, too, would "bear the weight of this new tax," said Callahan.

Another group, the Massachusetts Taxpayers Foundation, said the tax on computer services could cost the state's employers an additional $500 million annually. "The tax takes clear aim at the state's innovation economy, which is the essence of the state's competitive edge and at the core of its economic future. Many of the key investments in computers and software that help to incubate groundbreaking discoveries and cutting-edge ideas will now be subject to the sales tax," the nonprofit research organization said in a statement reacting to the initial bill in June.

Only three other states have a sales tax on computer services -- New Mexico (5.1%), Hawaii (4%) and South Dakota (4%).

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
InformationWeek Is Getting an Upgrade!

Find out more about our plans to improve the look, functionality, and performance of the InformationWeek site in the coming months.

News
How SolarWinds Changed Cybersecurity Leadership's Priorities
Jessica Davis, Senior Editor, Enterprise Apps,  5/26/2021
Commentary
How CIOs Can Advance Company Sustainability Goals
Lisa Morgan, Freelance Writer,  5/26/2021
Slideshows
IT Skills: Top 10 Programming Languages for 2021
Cynthia Harvey, Freelance Journalist, InformationWeek,  5/21/2021
White Papers
Register for InformationWeek Newsletters
Video
Current Issue
Planning Your Digital Transformation Roadmap
Download this report to learn about the latest technologies and best practices or ensuring a successful transition from outdated business transformation tactics.
Slideshows
Flash Poll