State Senator: Massachusetts Tech Tax 'Modernizes The Tax Code'

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Leaders in the Massachusetts legislature circulated memos around the state House and Senate maintaining their support and reasoning behind the tech tax, saying that it "modernizes the tax code."

Democratic Rep. Brian Dempsey, chair of the House Ways and Means Committee, sent out a memo with a paragraph supporting the measure and a question-and-answer response to some of the common concerns. His office could not find the memo when asked for it by CRN.

Democratic senators Stephen Brewer and Michael Rodrigues also sent out a fact sheet about the implementation of the tax and the confusion over who it affects.

[Related: Solution Providers Fight Back Against Massachusetts Software Services Tax]

In his fact sheet, Dempsey said that the tax was created to compensate for the increase in technology across the state.

"The modified computer software tax modernizes the tax code to catch up to changes in the $11 billion computer system design and related services industry," said Dempsey's fact sheet.

The tax has had the industry up in arms since it went into effect on July 31, extending the state's 6.25 percent sales tax to software services. Industry members complained about the tax's sudden implementation, lack of guidance and wide scope. It is the highest such tax in the nation, according to a publication by the Massachusetts Taxpayers Foundation. While New Mexico, Hawaii and South Dakota also specifically tax software services, none of their rates are as high as the one now in place in Massachusetts.

The fact sheet reiterated that the tax was estimated to generate annual revenue of $161 million, though the Massachusetts Taxpayers Foundation predicts as much as $500 million due to the tax's broad reach.

"The changes to the sales tax will help level the playing field by requiring technology companies' products to be subject to the sales tax, just as other businesses' products are taxed," Dempsey's fact sheet said, predicting it would affect 4,000 local businesses and mostly business-to-business transactions.

Democratic Sen. Karen Spilka put forward legislation to repeal the tax, and a measure has been put before the state attorney general to add an option to repeal on the November 2014 ballot.

The memo concluded that the Department of Revenue would be releasing more official guidelines for public comment in the fall regarding the tax. 


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