[Hidden-tech] clarification of IT Sales tax

[Don Lesser]

A number of us just received this from Stan Rosenberg's office. Here for
those who didn't is the detail. There is still a lot of ambiguity, but at
least they are trying to rein in the definition of the tax:


Senator Rosenberg forwarded your message and asked me to reach out directly
as this issue unfolds and in the event you might have additional questions
and/or need to be connected with the appropriate person at the Department of
Revenue (DOR).

There has been some differing reports as to what is covered and what is not.
Yesterday, the following summary was distributed to all members by the Ways
and Means and Revenue committees:

"The software service sales tax passed by the Legislature is substantially
smaller in scope than the version of the tax proposed in the Governor's
budget
The Governor's original proposal:
o	Applied the sales tax to all "programming" and "code writing"
services
o	Applied the sales tax to "modification or testing" of all existing
programs
o	Applied the sales tax to services creating custom software as well
as standardized software
o	Applied the sales tax to data access services
o	Applied the sales tax to the entire value of a bundled charge for
computer services
o	Applied the sales tax to the development of integrated computer
systems

The Legislature included a scaled-down proposal to apply the sales tax to
software in the Transportation Finance legislation:
o	Applies the sales tax to computer system design services 
o	Applies the sales tax to the modification, integration, enhancement,
installation and configuration of standardized software 
o	Specifies that the sales tax does NOT apply to data access, data
processing or information management services

Under the Transportation Finance legislation, the following are NOT subject
to the sales tax: 
o	Custom software NOT based on other prewritten software, written to
one customer's specifications
o	Website hosting
o	Data storage 
o	Disaster recovery and backup services
o	Proprietary code owned by the seller of modification to standardized
software, if the customer does not own the proprietary code
o	Computer services provided in-house by permanent or temporary
employees of the end-user
o	Diagnostic services to determine why software is not working
o	Technical support and training that do not involve the transfer of
any taxable item, prewritten software or otherwise
o	Transfer of Open Source software
o	Software services purchased by non-profit organizations under
501(c)(3)
o	Data processing services, including data conversion, data transfer
or migration, data manipulation, data entry and data reporting that does not
involve changing the code of prewritten software
o	Removing a virus from software/hardware already owned by a customer
o	Domain name registration
o	Domain privacy services
o	Software services performed before July 31, 2013, including prepaid
hours purchased and paid for before July 31, 2013"

You likely have seen the following information, but I'm sending it just in
case - last week DOR made a few resources available online which they've
been periodically updating as they receive feedback. They are worth a
review:
1.	A DOR website page dedicated to providing information on the recent
tax changes may be accessed at www.mass.gov/dor/newtaxinfo.

2.	The Technical Information Release related to the application of the
sales and use tax on computer/software services and a set of FAQs on the
subject matter may be accessed from this page.

3.	DOR anticipates providing further guidance on the application of
sales and use tax on computer/software services and asks that any comments
or suggestions be submitted to rulesandregs at dor.state.ma.  

4.	For additional information or questions, please call 617-887-6367 or
800-392-6089 in MA only.

DOR has been clear that they intend to apply the tax narrowly and to work
directly with impacted businesses to ease the transition. They've said that
they are not taking a heavy-handed approach re: compliance until the finer
details are settled. While it's unlikely there will be a repeal, there is
the chance that the provisions could be amended if there are unintended
consequences. DOR is holding a series of meeting with business owners and
other stakeholders to refine their guidelines and will, as you know, be
holding a meeting in the fall to gather additional input. These are standard
practices for any new tax.

Don Lesser
Pioneer Training, Inc.
139B Damon Road, Ste 8
Northampton, MA 01060
(413) 387-1040
(413) 586-0545 (fax)
dlesser at ptraining.com
www.ptraining.com