TaxConnections

 

Access Leading Tax Experts And Technology
In Our Global Digital Marketplace

Please enter your input in search

Tag Archive for H.B. 3535

Massachusetts Repeals Tax on the Modification of Pre-Written Software and Computer System Design Services

TaxConnections Picture - Computer SoftwareOn September 27, 2013, Governor Deval Patrick signed into law Massachusetts House Bill 3662 (“H.B. 3662”), which repeals the Commonwealth’s sales and use tax on computer system design services and the modification, integration, enhancement, installation, or configuration of pre-written software recently implemented by House Bill 3535 (“H.B. 3535”). H.B. 3535 became effective July 31, 2013, a mere 58 days ago. The repeal applies retroactively to July 31, 2013, with companies required to return to customers any sales tax collected for these services.

The Massachusetts Senate voted unanimously for the repeal, and the House of Representatives had only a lone dissenter. The Legislature originally passed the law by overriding the Governor’s veto of H.B. 3535 by a vote of 123-33 in the House and 35-5 in the Senate. The tax on computer system design services and the modification, integration, enhancement, installation, or configuration of pre-written software was expected to raise $160 million for the Commonwealth’s transportation systems and projects.

TECHNICAL INFORMATION CONTACT:
Jeremiah T. Lynch, Principal – Ryan

In accordance with Circular 230 Disclosure

Massachusetts Business Leaders Initiate Repeal of Sales Tax on Computer and Software Services

Repeal of Sales Tax on Computer and Software Services Blog PostJust weeks after passing the Commonwealth’s Transportation Finance Bill (“H.B. 3535”) through a legislative override, twenty top business leaders in Massachusetts filed an initiative petition to the state’s attorney general to repeal the law that made various computer services subject to sales and use tax. H.B. 3535 was passed into law on July 24, 2013 and took effect a week later on July 31, 2013. If the Attorney General deems the petition constitutional, the petitioners must collect 68,911 certified voter signatures by December 4, 2013. The Legislature will then view the petition and determine whether to repeal, modify, or take no action. If the Legislature takes no action, the petitioners will need to collect an additional 11,485 signatures. At that point, Massachusetts voters would decide whether to repeal the tax when they head to the polls in November of 2014. Besides business leaders moving to repeal the bill, Massachusetts State Senator Karen Spilka (D-Ashland) filed petition, S.D. 1872, to repeal the new sales tax. Senator Spilka previously voted in favor of H.B. 3535.

H.B. 3535 has created quite a buzz around Massachusetts, as businesses scramble to understand and properly apply sales and use tax to computer system design services and the modification, integration, enhancement, installation, or configuration of standardized software. As of August 9, 2013, the Massachusetts Department of Revenue publication Frequently Asked Questions: The New Computer and Software Services Tax Effective 7/31/13 had ballooned to fifty five questions, as the department continues to add new questions submitted by taxpayers. The Read more

Massachusetts Legislature Overrides Governor’s Veto; Passes Transportation Finance Bill

TaxConnections Picture - Gas ChartOn July 24, 2013, Massachusetts lawmakers voted to override Governor Deval Partick’s veto of the Commonwealth’s Transportation Finance Bill (“H.B. 3535”). As a result, the gas tax will increase by three cents per gallon; tax on cigarettes  by one dollar per pack; and computer system design services and the modification, integration, enhancement, installation, or configuration of standardized software will now be subject to sales and use tax. The revenue generated from H.B. 3535, as appropriately entitled, is designed to aid Massachusetts’ transportation systems and projects. The gas and cigarette tax increases, and sales and use tax on computer services are effective July 31, 2013 (seven days from the enactment of H.B. 3535).

“Computer system design services” are the planning, consulting, or designing of computer systems that integrate computer hardware, software or communication technologies and are provided by a vendor or a third party. “Modification, integration, enhancement, installation, or configuration of standardized software” are viewed as services that modify, enable, or adapt pre-written software to meet the business or technical requirements of a particular purchaser and to operate on the purchaser’s computer systems, regardless of how those services are described or billed to the customer. These services may also be described as customization services for pre-written software.

On July 25, 2013, the Massachusetts Department of Revenue released Technical Information Release 13-10 (“TIR – 13-10”), which provides guidance for the application of sales and use tax to these newly taxed computer services. This guidance includes transition rules for existing computer services contracts, sales and use tax filing requirements, and information on sourcing rules, including Multiple Points of Use. Read more