Business owners vow to fight for repeal of ‘confusing’ software tax
By Keith Regan, Contributing Writer
Westborough – Saying they have been blindsided and burdened by a newly enacted state sales tax on software services, a number of local technology business owners vowed to work for its repeal and pledged to stay more engaged in Beacon Hill politics in the future.
“We dropped the ball,” said Vic Melfa, owner and president of The Training Associates in Westborough, where some 30 business owners and executives gathered in a training room to tell State Rep. George N. Peterson Jr., R-Grafton, and State Rep. Matthew Beaton, R-Shrewsbury, how the new tax has impacted their businesses. “As business owners sometimes we are too focused on what we are doing and not engaged enough in what’s happening on Beacon Hill.”
First proposed in April, the new 6.25 percent tax took many by surprise when it was passed as part of a $500 million transportation-funding bill in June, a bill that survived a veto by Gov. Deval Patrick. The tax took effect on July 31.
The law has been widely criticized for being unclear about exactly what types of services are subject to taxation. The state’s Department of Revenue has sought to provide guidance, but business owners remain frustrated.
“We can’t get clear answers on what is and isn’t taxable,” said David Reske, president of Westborough digital marketing firm Nowspeed. “But even if we could, this tax represents a huge administrative burden. I am forced to work with every one of my 50 clients separately to help them understand which work we do is subject to the tax and what isn’t.”
One business owner said he spent 14 hours trying to parse out the tax implications while doing weekly invoices, a process that normally takes just an hour. And because the law only applies to companies with Massachusetts operations, it puts Bay State businesses at a disadvantage, others argued.
Corridor 9 Area Chamber of Commerce President Barbara Clifford said chambers were among the few business groups that lobbied against the bill, with the state’s high-tech business lobby largely caught off guard by its passage.
“We were on top of this and we continue to work with other groups to get the message out that this is a bad tax,” she said.
Peterson and Beaton urged the tech sector to support a three-pronged approach to repealing the law: Supporting legislation to be filed to roll back the tax; working to advance a ballot initiative already underway to put the tax on the 2014 statewide ballot; and backing efforts to challenge the law’s validity in court.
Republicans have sought to tap into outrage over the new tax, which appears poised to become an issue in next year’s gubernatorial race if it remains on the books.
“In addition to being confusing, this is a bad tax to begin with,” said Beaton. “We don’t want to start down the road of taxing services in this state, because it will make our businesses that much less competitive.”
Longer-term, Peterson said even a modest shift in the makeup of the overwhelmingly Democratic legislature would help ensure that such taxes aren’t adopted quietly.
“A few more voices for small business owners on Beacon Hill would go a long way,” he said.
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