The city of Boston has seen its fair share of famous tax revolts. And just as their revolutionary forebears successfully fought back against unwanted taxes, Massachusetts technology companies are seeing their own tax revolt gain traction.
This particular revolt had as its genesis a proposal put forth by Massachusetts governor Deval Patrick in an omnibus transportation bill. In order to help pay for the transportation overhaul, a new sales tax on software design services was included.
For a while this proposal slipped under the radar, not drawing too much attention or protest. That is until the new transportation bill was signed into law in July. At that point, lots of businesses and leaders in the Massachusetts technology community realized that, wait, this is law and we’re going to have to start paying this thing or figure out a way to stop it from going into effect.
Guess the state’s tech leaders went for option number 2. Putting forth an all-out press on politicians and local media, the tech community was able to get Massachusetts politicians to reconsider their positions to the point that Governor Patrick and most of the legislative leaders are moving quickly to get the “tech tax” portion of the transportation bill repealed as quickly as possible. Fast enough, they hope, to keep any technology companies from moving to New Hampshire or other friendlier states.
Now there are many reasons why people would oppose this bill. Some just have a full-on resistance to any and all taxes. Others question the wisdom of, in a state that relies heavily on the technology community for business growth, putting in place a tax that could drive businesses away.
To me, the main reason this bill should and will be repealed is simple. It’s complex, makes almost no sense and would be very difficult to comply with even for businesses willing to pay the tax.
This Massachusetts tech tax is simply the latest in a long line of legislative actions that are designed by technology illiterates. Basically, people who think of the Internet as a “series of tubes” and haven’t the slightest idea how software coding works, put together far reaching and overly broad laws that limit growth and discourage innovation.
Taxing products like cars, refrigerators and even full software applications is pretty simple and straightforward. Taxing services, of any kind, will typically open a full can of worms.
Many of the complaints around the Mass Tech Tax center around the confusion about just who and what would be taxed. Build a full custom app for a business, pay the sales tax. Make modifications and fixes? Not sure. What about a website? Is that an app? What happens when temporary workers at a company (not hired specifically to build or service software) do some software modifications and coding?
These types of questions just scratch the surface of the issues. Even the Massachusetts legislative leadership realized the problems with the tax once confronted with it. Which makes their initial decision to try to sneak the tax through the process even more suspicious. Maybe they realized it wouldn’t stand up to review.
Like a similar Maryland tax before it, the Mass Tech Tax looks like it’s destined for repeal before anyone has to figure out how or if they should pay it. Chalk it up as a win for the tech community.
But what will be their catchy slogan? Maybe something like “No Taxation Without Some Kind of Knowledge of How Software and Technology Services Actually Work!”
OK. I might need to work on that.