BOSTON (AP) — A new Massachusetts sales tax on software and computer services, part of a massive transportation financing plan that became law last month, has been met with anger and confusion in the state's technology sector, prompting calls for its repeal.
Business leaders brand the measure an "innovation tax" that strikes at the heart of ingenuity in Massachusetts, a pioneering state in the computer industry and still a cradle of cutting-edge entrepreneurship. The tax, which took effect July 31, also has been criticized as being so vague as to leave companies and their accountants scratching their heads over what it applies to while state tax officials scramble to sort it all out.
Two prominent business-backed organizations, the Massachusetts Taxpayers Foundation and the Massachusetts High Technology Council, are leading an initiative petition that urges lawmakers to repeal the tax when they return from summer recess. At least one bill has already been filed that would do so. If the Legislature doesn't act, opponents will ask voters to kill the tax on next year's state ballot.
In an Aug. 14 memo to legislators, the council's president, Christopher Anderson, said the tax threatens to make the state less competitive at a time when tech companies are expected to lead an economic revival.
"We have the highest percentage of tech workers of any state, the largest number of tech clusters, and a highly educated workforce that is second to none. However, none of the states with which Massachusetts most often competes for high tech jobs has a tax like this," Anderson wrote.
The measure imposes the state's 6.25 percent sales tax on certain computer system design services and the "modification, integration, enhancement, installation, or configuration of standardized or prewritten software." It's unclear if the Democratic-controlled Legislature will revisit the issue.
Sen. Stephen Brewer, D-Barre, chairman of the powerful Senate Ways and Means Committee and one of the principal architects of the transportation finance law, said no decisions had been made.
"I would welcome ideas if people had other alternatives," said Brewer. "We are not intractable."
Brewer noted that the tax, originally proposed by Gov. Deval Patrick, is one of several contained in the law that promises $800 million in new revenue for transportation and came in response to concerns from the private sector that the state's aging infrastructure was stunting economic growth.