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The Massachusetts Software Tax

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Re: The Massachusetts Software Tax

#61

Post by grumps »

MetaCosm wrote: post #8
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…

I stopped working with a client already over this. Simply put, cash-flow wise I can't currently risk taxes and penalties. It turned a customer into a liability because of the horrible wording and unclear guidance (seriously, they want us to pro-rate by the % of our software used in the state?). I suspect many other small start-ups will make the same choice we did until this all gets sorted out.

Out of curiosity - what made you feel that burden was placed on your company? From what I saw if you didn't have a MA tax ID and didn't have a physical presence in the state that burden would be placed on the purchaser.

Personally I read that it's kind of like sales tax, and buying online. If the seller doesn't do business in the state you reside it's up to the purchaser to pay the tax.

Re: The Massachusetts Software Tax

#62

Post by mjn »

rayiner wrote: post #52
pc86 wrote: post #49

Earlier quoted context omitted.

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?

That's sort of how I feel about U.S. taxes in general. I paid somewhat lower taxes in the U.S. than Denmark, but it felt like I got a ton less service. Despite paying taxes, there was no public healthcare, even public university charged thousands of dollars in tuition, transit wasn't great, unemployment insurance was relatively poor, public services like libraries were overcrowded, housing assistance had a 10-year waitlist. I'd happily pay more taxes in the U.S. if I felt that I got a high level of services. Or alternately I would feel that a fair rate for the level of services I did get was much lower.

Re: The Massachusetts Software Tax

#63

Post by Vivtek »

I like this translation of the FAQ into plumbing and carpentry services as an analogy that makes things easier to understand for non-software people (especially the one about RV plumbing that makes it clear that the buyer is liable for use tax for all use of the RV's plumbing within Massachusetts).

http://repealtheitservicetax.com/2013/08/02/plumbing-and-car...

Re: The Massachusetts Software Tax

#64

Post by cinquemb »

kmfrk wrote: post #55
cinquemb wrote: post #42

Earlier quoted context omitted.

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 .

Just checked, and they don't seem to have anything dealing with this.

Though a quick search has led me to find TIF Projection Reports for Chicago[0] from searching "debt obligation" in metro Chicago data [1], but I can't seem to find any past dealings (not sure how to look for it). I want to try to put the revenue generated from taxes (across different sectors if possible), servicing of obligations, population changes, and projected obligations in perspective, and compare to other cities/municipalities/states.

[0] https://data.cityofchicago.org/Community-Economic-Developmen...

[1] https://www.metrochicagodata.org/browse?limitTo=datasets&q=d...

Re: The Massachusetts Software Tax

#65

Post by rkaplan »

For anyone trying to determine how they can help: make a phone call. Politicians care about phone calls infinitely more than tweets or Change.org signatures. If enough people call the DoR (617-887-MDOR) and their MA representative with complaints, it's very possible that something could change.

Re: The Massachusetts Software Tax

#66

Post by IanDrake »

I live in Mass, but my consulting company is in CT. My current client is in MA and I do some work for them on site.

I read the law and best I can tell, I don't qualify for this. It seems to be centered around "pre-written" packaged software. I'm writing it right now, so how can it be "pre-written"?

I won't pay this tax until I hear a valid argument that doesn't start with "Well, to be safe...". I'm not paying the state protection money to be safe from vagueness of their laws.

Re: The Massachusetts Software Tax

#67

Post by loumf »

IanDrake wrote: post #66

I live in Mass, but my consulting company is in CT. My current client is in MA and I do some work for them on site. I read the law and best I can tell, I don't qualify for this. It seems to be centered around "pre-written" packaged software. I'm writing it right now, so how can it be "pre-written"? I won't pay this tax until I hear a valid argument that doesn't start with "Well, to be safe...". I'm not paying the sta…

If you are writing totally custom software, you are exempt (IANL -- but, it's pretty clear in the FAQ). If you customize pre-written software, you might have to collect/report tax (that's where it's vague what customize exactly means).

Using a library isn't customizing, according to the FAQ -- as long as the work done to use it is < 10% of the total project. So, if you take 5 months to write an iPhone App, then you need some library, and you download it and add it to your project in 2 days, you are ok. If you were worried, you could line-item it out and charge tax on just that work.

Re: The Massachusetts Software Tax

#68

Post by loumf »

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…

It is an open secret that compliance in the US with use taxes is nearly zero.

Yes, but at least in MA, they pay when they get audited. Small companies may not be complying without audits, but anyone big enough to use invoice processing software is probably complying -- or at least, is actively ignoring prompts from their software to comply -- which controller/accountants/CPAs don't usually like to do.

Re: The Massachusetts Software Tax

#70

Post by mjn »

tehwalrus wrote: post #56
keithpeter wrote: post #53

Earlier quoted context omitted.

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.)

That's not true in the EU across the board. If you're buying by mail-order, and the seller is above a certain size (small sellers exempt to reduce the compliance burden), they have to assess VAT based on the shipping address. For example, when I order from Amazon.co.uk to Denmark, Amazon charges me Denmark's VAT rates (which are higher and don't exempt books, alas).
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