If you buy or sell software or computer services that are used by anyone in Massachusetts, your life just got a lot harder. The State of Massachusetts has recently increased taxes on gas, cigarettes… and software. This tax applies to all “computer software, including pre-written upgrades, which is not designed and developed by the author.”
The vague new law inexplicably applies not just to Massachusetts developers but to every company with clients that “use” software in the state, whether they’re residents or not:
This hurts small development shops more than anyone. I’m sure the HPs of the world will be fine; big cap companies may have to invest quite a bit in training and accounting because of this, but they also have high-priced lawyers at their disposal who can work out the loopholes. It’s the freelancers and smaller shops who are already paying income tax on their work that will have the biggest increase in their administrative burdens, accounting costs, and liability as a percent of revenue.
The article notes a rumor that the law might be amended. We certainly hope that’s true. Some techies are already talking of abandoning Massachusetts if the tax stays in the books, and we wouldn’t blame them if they did. There are other states in the union that see small businesses as job creators, not as revenue cows to be milked to pay for all the unfunded goodies legislators have doled out over the years.Massachusetts already attracts many of our cleverest and most creative entrepreneurs during their most formative years. It’s up to state leaders to figure out a tax and regulatory system that makes these job creators want to stay. Increasing their tax, accounting, and administrative burdens with a burdensome law that no one seems to understand is not how you do it.[Image of MIT courtesy of Shutterstock]