Business leaders seek to repeal new computer tax
A coalition of business leaders from some of Massachusetts’s biggest companies including Staples Inc. and Boston Scientific Corp., are mounting a ballot initiative to repeal the newly imposed sales tax on computer software services.
The tax is part of an $800 million transportation finance bill that Beacon Hill and the Patrick administration wrangled over for months. State lawmakers overrode the governor’s veto in July, passing into law higher gas and cigarette taxes, and for the first time, applying the state’s 6.25 percent sales tax to a wide variety of computer services such as modifying software or building custom mobile apps.
“It’s a frightening tax because of the precedent to single out technology-related companies for a source of revenue,” said Pete Nicholas, chairman of Natick’s Boston Scientific, and a leader of the new ballot initiative. “It really acts against the impulses of people who want to grow and flourish in the state.”
The Patrick administration, which originally pushed the computer tax with the Legislature, noted the proceeds from the computer tax will be used to repair and upgrade the state’s roads and transportation systems, investments that will benefit the business community.
“The Governor supported this plan to invest in the future of the Commonwealth - and this particular avenue for raising revenue - because the people and the businesses of the Commonwealth want and deserve a reliable, modern transportation system,” his aides said in a statement.
Though state lawmakers worked on the legislation for months, the computer tax received little attention from the state’s business community; some leaders lobbied against, but many executives in the technology sector in particular acknowledged they did not even know about the tax until after it was imposed into law.
But as word spread about the new tax, a rear-guard action began to mount within the technology startup community. Now the entry of major employers, BJ’s Wholesale Club, Inc. and Analog Devices, will add a significant amount of political heft--and possibly money--to that political effort.
The ballot petition is led by 20 corporate executives and leaders of state-wide business groups such as the Massachusetts Taxpayers Foundation and the Massachusetts High Technology Council. Their goal is to ask voters on the November 2014 ballot to repeal the tax altogether.
They plan to file a petition on Thursday with the state’s Attorney General to begin the process of putting the question on the ballot. They hired the Boston public relations and lobbying firm Rasky Baerlein Strategic Communications to run the advocacy campaign for the next 15 months and help collect the signatures need to put the question to voters.
Nicholas admits the tax caught many within the industry off guard, and tech lobbies such as the High Tech Council, which he chairs, and its counterpart, the Mass Technology Leadership Council, had much impact when it came to fighting against it on Beacon Hill.
As defined by the Legislature, the new tax will be imposed on “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.”
Government officials said it should yield $160 million annually in tax revenues; business leaders contend the tax is so broadly written it will cost them some $500 million a year.