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Massachusetts: Transportation Plan Would Tax Computer Services

  • Jul 2, 2013 | Gail Cole

 Massachusetts governor would expand sales tax to include computer services.

Sitting on Massachusetts Governor Deval Patrick's desk is H 3535, "An Act Relative to Transportation Finance." The legislation was originally sponsored by the governor and recently approved by both the House and the Senate. Gov. Patrick (D) is expected to act on it by July 6, 2013.

The bill includes a controversial measure that would broaden the state 6.25% sales tax to include "…data access, data processing or information management services...." The term services "shall be limited to the following items: telecommunications services, computer design services and the modification, integration, enhancement, installation or configuration of standardized software."

In other words, notes a Boston Globe opinion piece, the measure would extend sales tax to "all of the computer services, IT work, or website developments or upgrades that companies hire third-party vendors to do for them."

Taxing computer services has been a controversial issue since it was first raised by the governor. The Massachusetts Taxpayers Foundation calls it a "Pandora's box," and argues it will take "a $500 million bite out of businesses…." Taking a different stance, the legal counsel for the Massachusetts Executive Office for Administration and Finance says the time has come for the state to "… catch up with the way that technology is affecting everyone in their daily lives…."

If it becomes law, the tax is expected to boost state revenue by $160 million annually.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
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.