Businesses Sound the Alarm Over Recently Passed “Tech Tax”; Governor Plans Summit to Address Concern

After the passage of the Commonwealth’s plan to address the transportation financing gap, many in the business community have raised alarm over the serious harm one of the key tax components presents to Massachusetts companies.  In particular, a movement has begun to solidify behind efforts to repeal the so-called “tech tax” – the new sales tax on computer services.  Governor Deval Patrick acknowledged legitimate concerns and a detrimental “reputational impact” created by a new sales tax on computer services.  As a result, he plans to meet with legislative and business leaders to discuss potential remedies, including the need to replace any revenue lost by a repeal of the computer services tax.. As reported by the State House News Service, Patrick stated, “I would say at this point I’m concerned but not alarmed, and I would say it that way because I think when we talk with people in the sector about the limiting interpretation that the Department of Revenue has put in place their blood pressure goes down but the reputational impact of the alarm about it is very concerning, very worrisome and it projects something I think was not intended by the Legislature.”

In pushing to repeal the tax, the Massachusetts High Technology Council and the Massachusetts Taxpayers Foundation have both said the tax creates a danger for what is now a growth industry, and it could raise $500 million, far more than the $161 million anticipated by the Legislature.  Within the legislature, many legislators have been barraged by calls from businesses that either rely on computer services or are producers of them.  Already legislation has been filed to repeal the measure although it is difficult to imagine such a measure passing without some other form of revenue replacing it.  As previously noted, the legislature passed a tax package that reduced the impact of the plan proposed by the Administration; but did so through a combination of tax mechanisms.

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