Massachusetts To Impose 6.25% Sales Tax on Computer System Design and Software Modification Services
Recently, Massachusetts enacted legislation which expanded the sales tax base to Computer System Design and Software Modification Services. This controversial tax provision was part of a Massachusetts’ transportation finance bill that went into effect just seven days after the legislation was enacted.
“On July 31, 2013, Massachusetts became one of only four states in the country to impose its sales tax on computer design services (Hawaii, New Mexico, and South Dakota are the other three), as well as software modification services. Not only is this a significant tax provision, but because the provision was effective just seven days after H.B. 3535 was enacted, vendors/providers of computer system design and software modification services will have to quickly assess the new law’s impact on their business and their sales tax registration, collection and remittance requirements. For some vendors this will represent the first time they will need to deal with sales tax collection responsibilities.”
By the way, this controversial new law will impact providers of the newly taxed services even if they are located outside of Massachusetts.
“And if you think the new law will only impact Massachusetts based vendors, think again! Out-of-state computer design/software modification service providers with nexus to Massachusetts will need to collect and remit on Massachusetts contracts to the extent the sale is sourced to Massachusetts unless the Massachusetts customer provides a MPU to the out-of-state vendor.”
Whether you’re a CPA that advises clients that offer computer system design or software modification services or are responsible for ensuring that your company is compliant with the new law work, you’ll want to understand whether the new Massachusetts law has an impact on your clients/company. I provide a detailed explanation of the new law, as well as provides links to resources, in my new post:
“Sales Tax on Computer Design, Software Modification Services: Massachusetts Issues Initial Guidance, Yet Questions and Challenges Remain” http://www.thestateandlocaltaxbuzz.com/2013/08/sales-tax-on-computer-design-software.html (The new post is also available in the iShade blogs – at The State and Local Tax “Buzz” blog)