[Discuss] taxachusetts and the future of tech

[tmetro+blu at gmail.com (Tom Metro)]

Rich Braun quoted Will Brownsberger posting at:
http://willbrownsberger.com/forums/topic/the-software-services-tax/
saying:
> And, of course, we have to ask: Why single out software services for taxation
> while leaving doctors, lawyers, accountants, dry cleaners and other service
> providers tax exempt? Software is not like cigarettes - it is not something
> one wants to discourage by special taxation.

One of the articles had a plausible explanation for this: large
consulting service organizations that bundle software sales with service
 were gaming the system by splitting the product/services bill to favor
service sales, thus avoiding as much sales tax on the products as they
could get away with. (The article had an example that went something
like a company selling $1 million in products and services, which would
normally be something like $500K for software, and $500K for services,
but gaming the bill to read $300K for software, and $700K for services.)

The legislators probably thought they were merely closing a loophole
being abused, but wrote a horribly bad implementation.

As with any tax consideration, legislators look for where they can
achieve their revenue targets while drawing the least negative response,
which likely encourages them to target small populations, particularly
ones that haven't been vocal in the past.

If they were seeking to be fair, they probably would have explored
imposing a universal service tax at a lower percentage, like a 1% or 2%
across-the-board service tax. (It wouldn't surprise me to learn that
some other states already do this.) There is already precedent defining
what a service is, as that currently determines what is is except from
the product sales tax. So the law would be simpler, and crystal clear
for the majority of service businesses.

But this would mean every service business in the state would be
impacted, and that would generate lots of unwelcome feedback to the
legislators.


Jack Coats wrote:
> And other than just another 'place to milk' taxes, why sofware
> services are taxed under transportation and not general funds?

I don't know this for a fact, but my assumption is that the new tax will
feed into the general funds. The only reason why it has any association
with transportation is that this was one of the revenue sources placed
on the other side of the ledger to balance the expenditures in the
transportation bill. A few years down the road (if it still exists),
it's introduction as part of a transportation bill will be long forgotten.

 -Tom

-- 
Tom Metro
Venture Logic, Newton, MA, USA
"Enterprise solutions through open source."
Professional Profile: http://tmetro.venturelogic.com/