by imb on 8/2/13, 8:58 PM with 81 comments
by asmithmd1 on 8/2/13, 10:47 PM
He thought he would reach out to some MA economic development organization and let them know what he was doing. They got back to him right away, I forget which exact agency, to let him know they would not be able to provide any help. He was kind of miffed because he hadn't asked for anything - but now he knew they would not be able to help no matter what he might need.
I tried to look up the agency he contacted and I found these agencies:
Commonwealth Corporation
MassDevelopment
Mass. Office of Housing and Economic Development
Mass. Office of Business Development
Mass. Business Development Center
Mass. Small Business Development Center
Mass. Export Center
Mass. Office of International Trade & Investment
MassVentures
Mass. Growth Capital Corporation
Mass. Technology Collaborative
Mass. Technology Transfer Center
Mass. Clean Energy Center
Mass. Life Sciences Center
Commonwealth Marketing Office
Don't worry about any waste or duplication - the Mass. Office of Performance Management & Oversight was created with the job of making sure all these groups are working together.
Each of these places has dozens if not hundreds of employees with titles I can't even parody:
Executive Assistant to the Deputy Director
Program Assistant to the Director
Director of Cluster Development
http://www.masstech.org/meet-masstech/our-team/meet-our-staf...
All of these people standing by ready to fire back an email that they really can't be of any help
by tomheon on 8/2/13, 10:37 PM
The wisdom of even that approach is debatable, but the actual language of the law is far from conveying that intent and is a total, indecipherable mess. No one has the remotest clue what is actually covered under the language of the law.
I'm part of a small software consultancy in MA, and we've now got 30 days to decide which of our customers this crazy language applies to, and which it doesn't. Is Django "pre-written" software? Does spinning up and customizing an instance count?
It's crazy town.
by readme on 8/2/13, 11:05 PM
The ABI Hub is an awesome coworking space and startup incubator in Manchester, NH. http://abihub.org/
I've been going there for a few months and moved to NH at the beginning of the year. It has been awesome.
There is a technology scene ready to bloom in Manchester. Also, the cost of living is about 50% of Boston's.
For those who aren't from around here, NH doesn't have unfair taxes :)
by rwhitman on 8/2/13, 11:03 PM
by tomkinstinch on 8/2/13, 10:32 PM
Is there a paralogous example from a different profession that we can use to gain insight into this new law?
by coldcode on 8/3/13, 12:11 AM
by Dangeranger on 8/3/13, 1:56 AM
The real salt in the wound for businesses was that the tax was going to be retroactively applied to the previous four years of revenue. This would have driven a fair share of our fledgling technology sector out of business almost immediately.
Thankfully, our Governor did not agree with the way the tax was passed into law, nor how it was applied. He first delayed and eventually removed the tax all together.
When politicians sneak revenue draining taxes into the business market like this, without public comment or discussion, it makes me truly concerned that they are simply self interested.
Hopefully the Massachusetts state house will pull their heads out of the sand and clear up the confusion with their constituents. Maybe by next election cycle, those affected will let their feelings be known in the polls.
by rwhitman on 8/2/13, 11:10 PM
It occurred to me I've been a developer for 13 years and have no clue who's got my back if the government starts to target my business unfairly. What kind of industry lobbies or trade groups are even out there to fight a law like this?
by dunham on 8/2/13, 11:07 PM
Per question 23, it appears that adding a computer to a LAN is an example of a taxable service.
by kgrin on 8/2/13, 11:15 PM
So with that in mind, the implementation problems include:
1) There was very little notice given to the affected parties - the bill passed July 24, effective July 31. (This is somewhat unavoidable, since part of the stated purpose of the tax is to fund transportation projects in 2013 - so delaying its effects would be counterproductive to the underlying goal).
2) There's still quite a bit of ambiguity surrounding implementation, including - crucially - what's taxable and what isn't. MA DOR (the state's version of the IRS) has issued some FAQs [2] and clarifications - which, annoyance aside, have actually been helpful. However, they only begin to answer the very real questions that this presents for many businesses - but we're responsible for collecting the tax basically yesterday (first filing due September 20, to cover taxes starting August 1). I read today that DOR will issue additional clarification and guidance in October... which I can only assume will be retroactive. So we'll likely be forced to either charge some people an unnecessary tax, or take an unexpected 6% revenue cut, or possibly end up having to pay penalties. Merits of the tax aside, the uncertainty - inevitable with such a new rule! - is what's killer.
3) Broadly speaking, the distinction they're trying to draw in the law does seem a bit weird. As I understand it (and IANAL, but have talked to a few - all of whom are still trying to parse what this means), if I write a custom CMS "from scratch", that's still considered a tax-free service. If I train you on, say, Wordpress (or any open-source or commercial product, really), that's still tax-free as well. If, however, I build a plugin to integrate Wordpress with your in-house SSO system - that's taxable. A custom theme? Probably.
Where do frameworks fit in? (Say, if I write you a shiny, custom CMS in Django). I don't know. There's a specific clarification issued by DOR that operating systems are exempt - or rather, to quote directly: "Custom application software (including custom software that incorporates such proprietary code) that is designed to run on a prewritten operating system is treated as custom software and not as a modification of the prewritten operating system software."
There are some interesting caveats being carved out - for example: "Suppose a computer system is designed but not actually built, so software is never actually integrated with hardware. Are the services still subject to sales tax? No."
Again, while on the whole I'd of course prefer that this tax go away entirely, at the end of the day it's no more or less rational than the taxation (or non-taxation) of many other goods and services. The critical problem here is the implementation, which introduces a whole lot of uncertainty and risk into a business that, until a few days ago, has never had to deal with this sort of thing.
[1] http://www.mass.gov/dor/businesses/help-and-resources/legal-...
[2] http://www.mass.gov/dor/docs/dor/law-changes/faqss-computer-...
by readme on 8/2/13, 11:07 PM
by saltyknuckles on 8/2/13, 11:11 PM
by jwatte on 8/3/13, 2:43 AM
by curiousdannii on 8/3/13, 12:12 AM
Here in Australia we have 10% GST (Goods and services tax). So wherever you're from in the country you can expect both goods and services to be priced the same. So much simpler for the average consumer!
by sologoub on 8/2/13, 10:31 PM
by asmithmd1 on 8/3/13, 1:11 AM
by camz on 8/3/13, 1:07 AM
Many states have long had laws that taxed "pre-written or canned software." MA is just one of the newer states that have enacted this law. New York has had the law in the books for years.
Pre-written software means that you've previously created software and you've literally re-used the code.
Professional, custom or designed software is still exempt as a "professional service."
What happens when you're like SAP and you start with canned software, but then customize it? Then, you pay sales tax on the canned portion and then you don't pay tax on the customization costs.
In sales tax audits, they test this by comparing code sold off the shelf to the code presented as "custom." Generally, consultants are used.
There are also sales tax on "informational reports." This started as paying sales tax for "stock tips" sent over the fax. But, today this has extended to informational reports that were created by software. Thus, a lot of businesses that "don't sell canned software" and provide a "service" cannot escape the tax law by simply providing the end product alone.
I can understand people getting angry, but the law has been around for a while... I've gone through multiple audits with companies such as reuters, bloomberg and etc. I don't particularly feel that its unfair, since if you provide a "custom service" then you're exempt.
Obviously, there are always going to be ways to "technically" get away with avoiding sales tax, but that doesn't mean that they're inherently unfair. Companies avoided paying sales tax on software for a while, until the states realized that they were being cheated by these businesses. Then, businesses decided that if we don't sell the software on "CDs" then its not tangible property and "legally not taxable." So, they would bring the CDs and install the software and then leave with the CD's to effectively avoid the sales tax.
Then, they started to allow the software to be hosted online and only provide the "end-product aka SaaS." Services are commonly exempt and hard to follow, thus they escaped the states radar for years. Its a cat and mouse game that will continue.
I think the best example is if an attorney or accountant were to provide the same exact tax return or memo to everyone, then it'd be taxable under sales tax law. But, because we provide a different memo or tax return to everyone (maybe using a system like turbotax or something), it is a custom product because the service is only applicable to that person. If the developer provides a copy of turbo tax, then its taxable because its always the same. But, if the developer uses RoR, Python or some other system to "create" the end product for the individual, then its not taxable. Hopefully, this crude example is decent enough to get the point across.
by cpursley on 8/3/13, 1:26 AM