Massachusetts Update – Possible Repeal of Sales Tax on Computer System Design Services

By Merrill Barter September 10, 2013

The transportation bill passed by the Massachusetts Legislature in late July included changes to the sales tax law making computer system design services taxable for sales and use tax purposes.  We discussed these changes in a previous Tax Advisory.

These sales tax changes are extremely unpopular, and Massachusetts Governor Deval Patrick (a former supporter of the tax change) and leaders of the Massachusetts House and Senate are now joining others calling for repeal of the tax on computer services in 2013.  A formal vote for repeal has not yet been scheduled, but the Chairman of the House Ways and Means Committee has stated that he plans to hold a vote in as little as a few weeks.

Due to the public statement of support for repeal of the “tech tax” by the Governor and Legislative leaders, the Massachusetts Department of Revenue on September 16 issued Technical Information Release (TIR) 13-14, Extension of Due Date for First Reporting of Sales and Use Tax on Computer and Software Services.  The TIR (found here) states that the reporting and payment of the sales tax and use taxes related to these services for the period July 31, 2013 through September 30, 2013 should be included on the September return, which is due October 20. This provides a one month extension, but only for the sales and use taxes that are under consideration for repeal.  Other sales and use taxes incurred in August are reportable, as usual, on a filing due September 20.

We will update you as information becomes available. Please contact Merrill Barter if you have any questions.