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The Massachusetts Software Tax

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Re: The Massachusetts Software Tax

#31

Post by mjn »

acomar wrote: post #24
dsr_ wrote: post #14

Earlier quoted context omitted.

It only applies to you, the seller, if you are located or have an office in Massachusetts.

> Anyone working in the IT industry who sells software or related services to any business that has any office in Massachusetts. So no, it applies if your client is located in the state.

It doesn't (and can't, unless Congress changes the law) override the basic requirement that Massachusetts can only require you to collect sales tax if you have a Massachusetts nexus establishing jurisdiction. However if you are 1099 consulting for an MA client, in many cases that will establish an MA nexus, so this will apply to many consultants who have MA clients. On the other hand if you purely operate a website where people can purchase software or hosted services with a credit-card, and you have no MA presence, merely having customers from MA won't establish an MA nexus.

Re: The Massachusetts Software Tax

#32

Post by cinquemb »

rayiner wrote: post #18

Unfortunately Mass. has unfunded pension liabilities exceeding $20 billion (not including municipalities), and unfunded health care liabilities exceeding $45 billion (including municipalities. At the same time, states will have to deal with the new normal, which is lower economic growth indefinitely and lower returns on invested assets. As a result, states will ratchet up taxes to cover their increasingly untenable b…

Unfortunately Mass. has unfunded pension liabilities exceeding $20 billion (not including municipalities), and unfunded health care liabilities exceeding $45 billion (including municipalities. At the same time, states will have to deal with the new normal, which is lower economic growth indefinitely and lower returns on invested assets.

Is there any place where one can read about this/ any place where one can see data? Now that we are in the new normal and have seen cities like Detroit go bankrupt, maybe states are facing the chopping block as well (depending if they can still afford to make payments on their liabilities). It will be interesting to compare other places based on their financials as well.

Re: The Massachusetts Software Tax

#33

Post by chalst »

asmithmd1 wrote: post #15

I don't understand how they singled out software developers. Why not lawyers or landscapers or pool service. Why not tax something that no one likes that can't move out of state - TV and radio ads?

What makes you think this only applies to software developers?

I provide editorial and publishing consulting - I don't write code to sell, but I do configure and patch other people's code. Am I covered by this law? Well, I guess I am.

Easiest solution for me: don't accept clients in Massachusetts.

Re: The Massachusetts Software Tax

#34

Post by patio11 »

And it’s not just Massachusetts developers that have to deal with this. It’s anyone who has clients who have “software” that is being “used” in Massachusetts.

Talk to your lawyer if you doubt me on this one, but Quill vs. North Dakota means that it is the well-settled law [+] of the United States that you cannot be liable for sales or use taxes enacted by a state which you don't have a "nexus" in. What exactly constitutes a "nexus" can be hazy, but the punchline for the overwhelming majority of HNers is that if you do not have an employee who performs work for you within Massachusetts you almost certainly do not have a nexus there.

Theoretically HN users who are also Massachusetts residents will have to start remitting use tax to the state to cover purchases of covered which they made from out-of-state merchants. It is an open secret that compliance in the US with use taxes is nearly zero.

+ Well, until they pass that threatened Internet tax legislation.

Re: The Massachusetts Software Tax

#35

Post by cinquemb »

pkmehta wrote: post #6

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…

San Bernadino and Stockton already went bankrupt, so I guess bond holders exposed there were just fine with that.

It's a game of wack a mole, and like all arcade games, they end pretty quickly when you can no longer put any more coins in.

Re: The Massachusetts Software Tax

#36

Post by neltnerb »

tehwalrus wrote: post #25

This is insane . Either add a sales tax (fixed %) to all B2B transactions (like UK VAT, which you're exempt from if you're tiny) or just don't. This minefield of regulations about what's taxable and what isn't will just make it much more expensive to sell things, as people pay for lawyers/accountants to figure out what "tax" to add to every outgoing invoice. Since this will decrease consumption, it will reduce other…

Agreed. I run a small business (thankfully not doing software) in Massachusetts. I don't mind collecting sales tax, but when they make it an overhead nightmare it's impossible to figure out. I'm just one person; when your revenues are in the $10k range, hiring someone to figure it out is impossible. If they just charged a fixed rate for everything it would at least not so heavily favor big business over small companies.

I'm also confused because it seems that most of the reasoning is that companies sell the software for cheap and then make the service contract expensive. I've seen this done by companies like Autodesk and National Instruments for sure, so I can see why they'd dislike it. I design custom equipment, and I'd be tempted to do the same (charge at close to cost for equipment and charge as a service for labor). But this seems like an incredibly poorly conceived way to fix the problem that will cause more issues than it will address, and it's surely not limited to software. I could pull the same trick in any kind of contract work.

Re: The Massachusetts Software Tax

#37

Post by dickbasedregex »

pkmehta wrote: post #6

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…

There are a ton of reasons the stay in or set up shop in California. Talent pool, established community, etc. I can't think of any for Mass. Massholes.

Re: The Massachusetts Software Tax

#38

Post by kmfrk »

cinquemb wrote: post #32
rayiner wrote: post #18

Unfortunately Mass. has unfunded pension liabilities exceeding $20 billion (not including municipalities), and unfunded health care liabilities exceeding $45 billion (including municipalities. At the same time, states will have to deal with the new normal, which is lower economic growth indefinitely and lower returns on invested assets. As a result, states will ratchet up taxes to cover their increasingly untenable b…

Unfortunately Mass. has unfunded pension liabilities exceeding $20 billion (not including municipalities), and unfunded health care liabilities exceeding $45 billion (including municipalities. At the same time, states will have to deal with the new normal, which is lower economic growth indefinitely and lower returns on invested assets. Is there any place where one can read about this/ any place where one can see dat…

Chicago is also boned in the future: http://mobile.nytimes.com/2013/08/06/us/chicago-sees-pension....

EDIT: Alternatively http://www.suntimes.com/news/cityhall/21642911-418/city-defi....

Keep in mind that Detroit had loaned money from other states that aren't likely to get it back.

Re: The Massachusetts Software Tax

#39

Post by mjn »

patio11 wrote: post #34

And it’s not just Massachusetts developers that have to deal with this. It’s anyone who has clients who have “software” that is being “used” in Massachusetts. Talk to your lawyer if you doubt me on this one, but Quill vs. North Dakota means that it is the well-settled law [+] of the United States that you cannot be liable for sales or use taxes enacted by a state which you don't have a "nexus" in. What exactly consti…

> the punchline for the overwhelming majority of HNers is that if you do not have an employee who performs work for you within Massachusetts you almost certainly do not have a nexus there

If you're a consultant who does work on-site for an MA client, that may also establish a nexus. In some cases it can do so even if you don't physically travel to MA, since the services can be deemed to have been rendered in the client's location. But others are deemed to have been rendered in the consultant's remote location. It's a little conceptually (and legally) unclear where remote services "happen", and seems to depend on the state and the service and the precise consulting relationship.

Re: The Massachusetts Software Tax

#40

Post by antihero »

mjn wrote: post #31
acomar wrote: post #24

Earlier quoted context omitted.

> Anyone working in the IT industry who sells software or related services to any business that has any office in Massachusetts. So no, it applies if your client is located in the state.

It doesn't (and can't, unless Congress changes the law) override the basic requirement that Massachusetts can only require you to collect sales tax if you have a Massachusetts nexus establishing jurisdiction. However if you are 1099 consulting for an MA client, in many cases that will establish an MA nexus, so this will apply to many consultants who have MA clients. On the other hand if you purely operate a website w…

What if I'm in the UK? Am I going to get extradited?
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