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Massachusetts: Controversy Surrounds Taxation of Cloud Computing

  • Mar 25, 2013 | Gail Cole

 Massachusetts: Storm Brews over Taxing Cloud Computing Services.

The Massachusetts Taxpayers Foundation has issued a strong statement against Governor Deval Patrick’s proposal to tax cloud computing services, which is part of his FY 2014 budget plan. MTF calls the “proposal to tax computer and data processing services and custom software” a “Pandora’s box” that will create “numerous problems” and seriously undercut the state’s competitiveness.

The Taxpayers Foundation -- a non-partisan organization "widely recognized as the state's premier public policy organization dealing with state and local fiscal, tax and economic policies" -- is against taxing cloud computing services for the following stated reasons:

  • The tax will increase costs for virtually every business in the state;
  • The tax is unclear and complex;
  • The tax will become more challenging to administer as technology evolves, which it does constantly;
  • The tax targets cutting-edge innovation that is expected to significantly drive the state’s economy;
  • The tax sends a negative message to an industry the state is trying to attract; and
  • The proposal would tax efforts to improve health care quality and reduce costs.

David Sullivan, legal counsel for the Executive Office for Administration and Finance in Massachusetts argues that “we need our tax code to catch up with the way that technology is affecting everyone in their daily lives…. We’re not living in the 19th century any more, we have modern products that have modern needs, and we have to accommodate to those needs.” (WBUR).

WBUR reports that “[a]t least 14 other states have enacted similar taxes, and as many as 28 have at least some components of what’s being proposed in Massachusetts.” Governor Patrick has not said whether or not the proposed tax on cloud computing services is open to negotiation.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.