Cape Cod 5

May 1 2013 Infrastructure Committee: Proposed Internet Services Sales Tax Discussion

How would your customers respond to a 4.5% increase to their service invoice?

It may happen – as early as this summer. And the extra money does not go to your business. It’s a proposed sales tax, bundled with others in the proposed state budget.

Yes, it is a sales tax, not an income tax, so it gets passed onto the client. But you can quickly see the competitive disadvantage for Massachusetts developers and others in the tech industry. Suddenly, our bills go up by 4.5%.

The sales tax is on “computer and data processing services,” which include “programming, code writing, modification or testing of existing programs, feasibility studies and design and installation of computer systems that integrate computer hardware, software, and communication technologies…provision of access to software or the storage of data on the seller’s or a third party’s server including disaster recovery services and bundled charges….”

In other words, everything we do.

It affects us personally, but it also affects us as a community, undermining our efforts to promote the Smarter Cape and Innovation economy. With a tech service tax, Massachusetts as a whole becomes less desirable to those companies we have been working to attract. For larger companies, the amount of added tax burden is equal to a developer’s salary (with benefits).

The proposed tax has passed the House of Representatives and has gone to the Senate. We have an estimated two weeks to get the story out and talk to our Senators. Because the story is definitely not out.

We are reaching out to the Massachusetts Technology Leadership Council, which we have not yet seen a stance on the proposed tax. We are also reaching out to the Cape Cod Chamber of Commerce and Smarter Cape, as well as our Senators.

What can you do Write a letter to your Senator. Representative Brian Mannal tells us that multiple copies of the same letter count as one letter, so please write your own.

As our representatives work to get a balanced budget through, they have a lot to keep in mind. An easy way for states to get revenue is to tax a growing sector. The technology sector in Massachusetts is just too tempting a target. 17 other states assess sales tax to services.

Let’s hope Massachusetts doesn’t join them.

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