Software companies and supporters filed a petition Wednesday to fight back against a newly implemented software services tax in Massachusetts that has local businesses and advocates up in arms about its potential harm to one of the largest tech company hubs in the country.
The law went into effect July 31, just a week after its approval, and has left Massachusetts companies and those with clients in the state scrambling to adapt to the new tax, which is part of a new law to fund the state's transportation system. The law would extend the state's 6.25 percent sales tax, which was previously limited mostly to goods, to a wide variety of tech services, from building websites to updating software on a client's computer. The tax is expected to raise $161 million a year, but industry predictions say it could actually be more than $500 million because of the broad implications of the tax on businesses.
"It would cut a broad swath across the entire Massachusetts economy. When we call it a tax on innovation, we're not exaggerating. We pride ourselves on being a state on innovation -- that separates us from other states and gives us a competitive advantage," said Michael Widmer, president of the Massachusetts Taxpayers Foundation and an orchestrator of a petition against the tax. "Other states couldn't be asking for a better opportunity."
The official process to get the issue on the ballot is a long one. Widmer and other industry supporters kicked off the process by filing their initial petition with the state attorney general last Wednesday. Although the tax could be repealed earlier, the petition fights to put the issue before a state vote, where Widmer and supports hope the tax will be reversed. As part of the petition, 20 signatures were submitted with representatives from smaller technology companies and big names such as Staples Inc., BJ's Wholesale Club Inc. and Boston Scientific Corp.
The next step is gathering approximately 70,000 signatures from all the counties in the state, though the real aim is more than 80,000, said Joe Baerlein, President of Rasky Baerlein Strategic Communications Inc., the company leading the advocacy campaign. That process will continue until the end of the year and then will switch into full gear with an advertising campaign and other media to raise public awareness. However, Baerlein said that he hopes the issue doesn't have to make it to that point and that legislature will see the opposition to the issue and repeal the offending portion of the law before it even makes it on the 2014 ballot.
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