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The Massachusetts Software Tax

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Re: The Massachusetts Software Tax

#51

Post by pc86 »

mvc wrote: post #47
neltnerb wrote: post #36

Earlier quoted context omitted.

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 compani…

> software for cheap and then make the service contract expensive If the software is cheap, it is expensive to service it.

I know what you're saying, but I think his point was if you spend $100k developing software, sell it for $100 and sell service contracts for $10k instead of selling it for $5k with a similarly priced service contract.

Re: The Massachusetts Software Tax

#52

Post by rayiner »

pc86 wrote: post #49
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…

It isn't a foregone conclusion that states and other governments must increase taxes. If there's less money to go around, they could always spend less money. I'm not trying to make a political point, but there are certain states where the knee-jerk reaction is all too often to increase taxes - or to tax unpopular things like cigarettes - rather than take a look at the budget and see if there's a middle ground.

Unfunded liabilities are spent money coming due. You can cut services in other places, but that's a similar tradeoff. At the end of the day, why live in a state that taxes you like California but gives services like Tennessee?

Re: The Massachusetts Software Tax

#53

Post by keithpeter »

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…

http://www.hmrc.gov.uk/vat/index.htm?_nfpb=true&_pageLabel=p...

Not quite easy but if your business turns over more than £79k then you will have registered for VAT in the UK.

A US state VAT system would, presumably, result in a matrix multiplier (52 by 52 or whatever the number of different rates are) and require companies to track transactions in the various states.

Re: The Massachusetts Software Tax

#54

Post by grumps »

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…

I just scanned the FAQs from the MA DOR. Seems one should avoid having any physical presence in the state of MA. Avoiding the Physical presence would require the client to handle the burden of the tax.

Re: The Massachusetts Software Tax

#55

Post by kmfrk »

cinquemb wrote: post #42
kmfrk wrote: post #38

Earlier quoted context omitted.

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.

Do states and cities release data like this for the public to see (kind of like open gov api's in csv/json/xml)? I wonder how many more cities/states are taking loan money from other cities/states and are facing the gaping holes in their budgets? It would be pretty cool to throw something together and put it up on github.

If they do, the Sunlight Foundation would be the people to ask: http://sunlightfoundation.com.

Re: The Massachusetts Software Tax

#56

Post by tehwalrus »

keithpeter wrote: post #53
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…

http://www.hmrc.gov.uk/vat/index.htm?_nfpb=true&_pageLabel=p... Not quite easy but if your business turns over more than £79k then you will have registered for VAT in the UK. A US state VAT system would, presumably, result in a matrix multiplier (52 by 52 or whatever the number of different rates are) and require companies to track transactions in the various states.

State of seller determines the tax rate.

In the EU, if you're British and buying from Germany, you pay German, not British, VAT rates - they should copy that.

Agreed though, that British VAT isn't as simple as it could be (whole categories exempt, etc.)

Re: The Massachusetts Software Tax

#57

Post by grumps »

chalst wrote: post #33
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.

If you don't have physical ties to the state, I believe it isn't your problem, it's theirs, then again I'm not a lawyer or an accountant.

Re: The Massachusetts Software Tax

#58

Post by crazygringo »

I can't find the link to the previous HN thread about this (and Google isn't helping), but someone had posted that the whole point of this tax was to essentially close a loophole where normal software sales are taxed, but a consulting firm who makes a tiny tweak and sells the software under "consulting services" because they "install a solution" for the client, doesn't charge sales tax.

So if that's accurate, it makes perfect sense. Of course, crafting a law that actually targets this and this only is extremely hard to do, and the short notice here is ridiculous.

But if that's the actual motivation behind the law, it's just a case of where do you draw the line between selling products (taxed) and selling services (not taxed)? Of course there's a gray area between them.

Re: The Massachusetts Software Tax

#59

Post by troels »

chalst wrote: post #33
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.

Oh you can accept them alright. Just recharge the extra tax to the customer, if they're from MA. You don't even need to worry about if it applies to that particular invoice or not - Just add it in any case.

Re: The Massachusetts Software Tax

#60

Post by dragonwriter »

yourapostasy wrote: post #50
mjn wrote: post #31

Earlier quoted context omitted.

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 you are a SquareUp.com and you send hardware to your customers that enables the out-of-state hosted service? Even if the hardware was free to the customer, as I read the new law in the context of real property that establishes nexus, simply having hardware in the state establishes nexus.

Square readers are tangible personal property, not real property; and they are tangible personal property o the customer once they are sent out, not of SquareUp. So, they have zero relevance to a rule that would make real property owned by SquareUp a nexus in the state, as they are neither real property nor owned by SquareUp.
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