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It's a great way to drive that particular business out of the state. If they apply this tax towards STEM education, then the benefit might be worth it.
Wow, so if I run a SaaS from, say, the Netherlands, I'm going to have to pay Massachusetts some kind of extra income tax? What if I don't even know where my customers reside? The US just became a little more EU. Congratulations! EDIT: I meant 'import tax' where I wrote 'income tax'. Sorry for the confusion.
Wow, so if I run a SaaS from, say, the Netherlands, I'm going to have to pay Massachusetts some kind of extra income tax? What if I don't even know where my customers reside? The US just became a little more EU. Congratulations! EDIT: I meant 'import tax' where I wrote 'income tax'. Sorry for the confusion.
The people this impacts are those currently consulting for MA clients in a capacity that was not considered software sales previously, but now might be. For example, if you sold an analytics package in boxed software, that was always clearly a "sale" and is unchanged. But if your business is based around, for example, having a free SaaS analytics service, along with an offer that enterprise clients can pay you to get a self-hosted version installed on their own servers, that has typically been treated as consulting in MA, but is being reclassified as selling software. The theory is that you are basically selling software (a copy of the analytics package), not really consulting, and the fact that you didn't put it in a box with a bar code is irrelevant. The complaints are largely based around the vagueness of the definitions and the short notice of implementation.
What a mess. At this point I'm not inclined to sell to anyone in the state.
Why not tax something that no one likes that can't move out of state - TV and radio ads?
It's a great way to drive that particular business out of the state. If they apply this tax towards STEM education, then the benefit might be worth it.
You understand that if it drives the business out of state, there is no benefit, no upside. There is no money to go towards STEM, and if the states general economy goes down over it -- it is a net-negative on STEM.
But yes, it is a net negative....I just don't understand why they would do this. They should be offering incentives to stay there. This is a self-invoked brain drain.
As a result, states will ratchet up taxes to cover their increasingly untenable budgets, as we've seen in Illinois (which recently almost doubled its state income tax) and Mass.
My guess is that this process will accelerate the internal migratory trends that are already in place. E.g. Nebraska, which banned defined-benefit pensions in the 1960's is sitting pretty with $43 of unfunded liabilities per person. Relevant to tech, the following states have big research universities (and thus a supply of educated workers) and also relatively manageable unfunded liabilities: Pennsylvania, Michigan, Wisconsin, Texas, and North Carolina: http://www.nasra.org/resources/Moodys1101.pdf.
This is going to increasingly become common esp as governments try to cover budget gaps. We just went through a sales tax audit for our SaaS company and so are expecting a good size bill for taxes not paid + penalties. Yes - fun stuff. Honestly, the gov't folks are playing whack-a-mole here trying to keep up with fast-growing areas that don't fit the old "you sell this widget for $X" model they're used to. And so the…