One Down, One To Go: Mass. House Votes To Repeal Tech Tax

In the first step toward the full repeal of the now infamous Massachusetts "tech tax," local IT businesses can claim a decisive victory. The Massachusetts House of Representatives voted 156 to 1 on Wednesday to repeal the tax from the transportation bill.

"One small step for technology, one giant leap for innovation, I guess," said Andrew Faria, CEO of iMedia Solutions and a leader in the Spark Coalition advocacy group fighting the tax, in an interview with CRN.

The tax on software services has caused a ripple of anger across the state as local businesses struggled to understand and implement the vague tax that was put into effect only a week after it was passed on July 24.

[Related: How Did It Happen? The Massachusetts Tech Tax Timeline ]

"It felt punitive," said Richard Stearman, vice president of Ashdown Technologies Inc. in Manchaug, Mass., at a press conference prior to the vote. "We felt like we were really being punished, and we were supposed to be one of the groups that was supposed to be there helping to move the economy forward, and here was this new burden that was being placed on us and not a small burden at that."

The state's tech community, which previously had been rather disjointed and quiet in the political arena, was awoken by the tax. Many banded together to face the tax, forming groups such as the Spark Coalition and planning events such as the Beacon Hill Blitz, which organized a phone call bombardment of the State House.

"In truth, I don't recall anything in which there has been this kind of change, within 60 days, to reverse course," Michael Widmer, president of the Massachusetts Taxpayers Foundation, told CRN. "That reflects, obviously, the storm that was unleashed, but it also reflects [the legislature's] decision not to wait any longer and act expeditiously."

However, at a press conference prior to the vote, legislators said the repeal isn't enough.

"What we've learned in this process is that Beacon Hill's process is broken. The legislative process is broken, and because of that the economy in Massachusetts is broken. It's devoid of jobs, opportunity, economic growth, and that is what we seek to change. It's all well and fine to repeal the tech tax today. We've been talking about that for a long time. We're encouraged by it; we've worked hard to make it happen. However, you know, there's a point in which the legislature has to do its homework," said Rep. Ryan Fattman at a press conference prior to the vote.

NEXT: Is This Enough?

Representatives Bradley Jones, George Peterson, Bradford Hill, Elizabeth Poirier and Viriato deMacedo put forward an amendment that would require public hearings on all tax bills and make committee hearings public and calls for an economic analysis study of all new taxes. Rep. Fattman, who supported the amendment, said the changes would give greater transparency and understanding to new taxes that will affect the Commonwealth.

"I think what you see sometimes is that it takes an incident or an episode like this to kind of change the prism that you look at government through, and this might be just that type of vehicle," Rep. Kuros said at the press conference. "There's an old adage -- if you don't learn from the past, you're destined to repeat it."

Rep. Jones said before the vote during the formal session that, while he has helped spearhead the fight against the tax, its repeal was still bittersweet.

"I thought that this was a great day, an exciting day. But in reality, it's bittersweet because as happy as I am that we primarily ... were right from day one and that I should be very excited that we are repealing this tax today -- and I am, and I know that is a positive step for our economy -- but then I thought how sad it is that during this session, the positive thing is undoing a stupid thing we did six weeks ago. And if that's how we do it going forward, we're not going to improve our economy at all," said Rep. Jones in his speech.

Rep. Brian Dempsey, who had remained strong in his support of the tax, distributed a memo among the House on why others should hold fast as well. In a speech before the vote, while he recommended the repeal of the tax, he maintained there had been hearings and positive feedback from the business community prior to the implementation. Other members such as Rep. Angelo Scaccia continued to support the tax, saying it didn't tax innovation because it didn't tax the cloud.

Multiple amendments were also proposed during the session, including a tax break for small businesses and the waiving of the gas tax. However, none were passed because they were not within the scope of the bill for repeal.

While the tax was repealed, the road to recovery through future political involvement is not over, said business leaders. "It's just the first step through a long, long journey through Massachusetts innovation and technology policy," said iMedia's Faria, who added that the Spark Coalition will continue to operate as an advocate for the tech community going forward.

The Senate is speculated to vote tomorrow on the issue, which would solidify the repeal of the tax.

PUBLISHED SEPT. 25, 2013