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Massachusetts enacts 6.25% sales tax on "prewritten" software consulting

marshallr (741074) writes | about a year ago

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marshallr (741074) writes "Technical Information Release TIR 13-10 becomes effective in Massachusetts on July 31st, 2013. It requires software consultants to collect a 6.25% sales tax from their clients if they perform "computer system design services and the modification, integration, enhancement, installation or configuration of standardized software." TIR 13-10 was published to mass.gov on July 25th, 2013 to provide the public a few working days to review the release and make comments. Can someone clue me in on what's meant by "prewritten" or "standardized" software?"
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The Law (1)

jbolden (176878) | about a year ago | (#44410859)

What it seems to be saying is that most forms of independent consulting if the recipient is in Massachusetts is subject to sales tax. If you take a piece of software and only: modify, integrate, enhance, install and configure it you are subject to tax. Custom software or use isn't taxed.

http://www.mass.gov/dor/businesses/help-and-resources/legal-library/tirs/tirs-by-years/2013-releases/tir-13-10.html [mass.gov]

I would agree this is vague but that's not a problem since a vague transaction can be broken up into a taxable and non-taxable component.

So for example X sells Y Oracle and also writes some custom scripts. The license for Oracle, the installation and the support are taxed. The custom scripts and the support for them are not taxed.

Here is the draft where the examples were more clearly spelled out:
http://www.mass.gov/dor/businesses/help-and-resources/legal-library/directives/directives-by-decade/2013-directives/working-draft-dd-software.html [mass.gov]

As an aside the comment in the article about the law applying to existing agreements if false:

IV. Transition Rule for Existing Contracts

Contracts for taxable Computer/Software Services entered into before July 31, 2013 are not taxable except to the extent a payment under such a contract is invoiced or billed (or if not invoiced or billed, due under the terms of the contract) on or after July 31, 2013 and only to the extent that the payment relates to services performed on or after July 31, 2013.

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