[Hidden-tech] IT Sales tax on writing a website vs writing a program?

[Rob Laporte]

This reply pertains mostly to firms doing website work. As Rich Roth pointed
out, the state has yet to clarify applicability to website work:

> Is Website Design a taxable service?
> A. The Department understands that website design may be accomplished in
> various ways, which may result in part or all of the charges being subject to
> tax. The Department is gathering further information on the various business
> models involved. (Answer Revised 8/12/13)

For the last year of so my firm has been working on reducing to about 20%
our too high percent of website coding work vs. search marketing work, and
this law motivates speeding up this move, but we¹ll always do some web dev,
and here¹s how I¹m planning to handle it.

I¹m no lawyer, and I¹d be curious to hear a lawyers¹ reply to this post. (A
cynic would say this law was passed for the benefit of lawyers as well as
the state.)

First, the ambiguity of the law makes the state¹s civil litigation against
an alleged offender difficult, so I would imagine the state would first go
after clear violations at larger firms offering the state relatively
certain, larger payments. This means that anything I can do to make the
applicability of the law more ambiguous further reduces my firm¹s
liabilities.

As Don and I pointed out in previous posts, there¹s lots of ambiguity in the
case of, say, customizing WordPress or Drupal or plugins or other open
source software. Adding text is almost certainly excluded. What about adding
a little CSS to change the font of text? Altering the template widths for
text placement? This means that for starters, my firm will write timecard
entries, invoices, and contracts with slants like the following:

* Instead of ³Configured WordPress² I¹d write ³Added and formatted website
content.² 
* Or instead of ³install WordPress shopping cart², I¹d write ³Research best
shopping cart; add products to the shopping system² (yeah, this omits the
install, but I¹m playing by the same ruthless rules used by my
opponents‹install time, which is very brief, can be ³free²).

You get the idea. Sure, some of this might not hold up in court, but it also
might, and the ³might² reduces the state¹s willingness to prosecute and thus
reduces my firm¹s liabilities.

The law seems to allow for other, more aggressive ways to avoid the taxes
for website work as well as other software work. Don¹s copied email from
Representative Stan Rosenberg and the law state:

> [from Rosenberg] Under the Transportation Finance legislation, the following
> are NOT subject
> to the sales tax:
> ( . . . )
> * Proprietary code owned by the seller of modification to standardized
> software, if the customer does not own the proprietary code

> [From the law] ³prewritten software does not include proprietary code owned by
> the provider (seller) of the modifications if that proprietary code is not
> separately licensed to customers² ( #2 at
> www.mass.gov/dor/docs/dor/law-changes/faqss-computer-software-2013.pdf)

More ambiguity, less liability. So if my firm owns the modifications and
does not license it to the client, we¹re good. Looks like I could claim in a
contract that my firm owns the custom code we apply to, say, WordPress, but
that I do not charge for or license the code to the client. This suggests
wording of contracts, invoices, and time cards.

The point is that sloppy laws are not easily enforced, for their ambiguity
and contradictions make enforcement impractical. We can do things to greatly
reduce if not eliminate what is, by the letter of the law, taxable.

Best Regards,

Rob Laporte
President and CEO
DISC, Inc. - "Making Web Sites Make Money"
413-584-6500
Fax ­ 413-553-0745
Rob at 2disc.com 
www.2disc.com 

Note: Increasingly, ISPs, companies and individuals use spam blocking
systems that block legitimate email too. Important emails should be followed
up with a phone call if no reply happens within an expected span of time.





From: Don Lesser <dlesser at ptraining.com>
Reply-To: <dlesser at ptraining.com>
Date: Fri, 16 Aug 2013 20:48:42 -0400
To: Bobbi Melville <bobbimelville at gmail.com>, Hidden-Tech Tech
<hidden-discuss at lists.hidden-tech.net>
Subject: Re: [Hidden-tech] IT Sales tax on writing a website vs writing a
program?

   ** Be sure to fill out the survey/skills inventory in the member's area.
   ** If you did, we all thank you.



The problem is that depending on your reading of the law, are you
"customizing commercial software" or writing "custom software?" The first
is taxable, the second not. The problem is that unless you write in machine
code (and even then) are you using a software tool (C#, PHP, "raw" HTML) or
customizing a program (MS SQL, PeopleSoft, MS Access, Excel VBA,
WordPress)? We all know what we want to be the interpretation. Is
customizing adding additional code to the actual application or is it using
the GUI or query/programming language? They have yet to rule on it.

Please understand, I am no apologist for the law. I am only trying to
interpret it. The real issue is whether the law is discriminatory, whether
it will negatively affect a vital Mass industry, whether it was so poorly
understood by the legislature that in thinking they were going to be less
restrictive than the governor that they did not understand what the law
would cover, and, whether in rushing to implement the law in 9 days, they
missed the opportunity to have the IT community weigh in and ask these
questions before the law went into effect instead of after.


-------- Original Message --------
> From: "Bobbi Melville" <bobbimelville at gmail.com>
> Sent: Friday, August 16, 2013 8:18 PM
> To: "Hidden-Tech Tech" <hidden-discuss at lists.hidden-tech.net>
> Subject: [Hidden-tech] IT Sales tax on writing a website vs writing a
program?
> 
> ** Be sure to fill out the survey/skills inventory in the member's area.
>    ** If you did, we all thank you.
> 
> 
> 
> Thanks, Don, for posting the official "clarification" of the new tax.
I'm
> still confused, though. If I write a custom website for an organization,
> using html, css, and perhaps a javascript or two - is that taxable?
> 
> _______________________________________________
> Hidden-discuss mailing list - home page: http://www.hidden-tech.net
> Hidden-discuss at lists.hidden-tech.net
> 
> You are receiving this because you are on the Hidden-Tech Discussion
list.
> If you would like to change your list preferences, Go to the Members
> page on the Hidden Tech Web site.
> http://www.hidden-tech.net/members


_______________________________________________
Hidden-discuss mailing list - home page: http://www.hidden-tech.net
Hidden-discuss at lists.hidden-tech.net

You are receiving this because you are on the Hidden-Tech Discussion list.
If you would like to change your list preferences, Go to the Members
page on the Hidden Tech Web site.
http://www.hidden-tech.net/members

-------------- next part --------------
An HTML attachment was scrubbed...
URL: http://lists.hidden-tech.net/pipermail/hidden-discuss/attachments/20130817/0cdd9aac/attachment-0001.html