Mass. GOP Calls For Repeal Of Software Tax

Republican lawmakers and business groups ramped up pressure Monday on the Legislature to abolish a new sales tax on computer and software services.

Rep. Brad Jones, minority leader of the Massachusetts House, and Sen. Bruce Tarr, the minority leader in the Senate, filed a bill to eliminate the 6.25 percent tax that took effect July 31 as part of a massive transportation financing law.

The tax has drawn sharp criticism from technology companies that contend it will hurt a critical sector of the state's economy.

Meanwhile, the Massachusetts Taxpayers Foundation, which also opposes the tax, released a new analysis Monday that the business-backed organization said supports its assertion that Massachusetts now imposes the highest tax in the nation on software services.

According to the study, only four other states — Connecticut, Hawaii, New Mexico and South Dakota — tax computer system design and all do so at a lower rate than Massachusetts.

"Repealing the tax would return Massachusetts to the mainstream of the 50 states," said Michael Widmer, president of the foundation. "With Massachusetts losing 3,000 jobs since January, placing the highest tax burden in the country on innovation and technology — the state's greatest economic strength — is simply bad policy."

Democratic legislative leaders and Gov. Deval Patrick, who met with business leaders last week to discuss the tax, have not ruled out the possibility of changing or repealing it. But they also have insisted that if the tax were to be altered or eliminated, it would need to be replaced by another tax or measure that delivers an equivalent source of revenue for transportation and other budgetary needs.

State officials estimate the tax will generate $161 million in the current fiscal year.

The Republican bill mirrors the language of a petition filed by business groups that would ask voters to repeal the tax on the November 2014 ballot if lawmakers do not act in the interim. It does not specify an alternative revenue source and GOP lawmakers have previously maintained that the state's transportation woes can be solved through greater efficiencies rather than new taxes.

Jones, R-North Reading, and Tarr, R-Gloucester, announced the legislation at Genuine Interactive, a Boston-based digital media firm with about 100 employees. John Grayson, the company's chief executive, said out-of-state vendors were using the tax as a means for luring businesses away from Massachusetts.

Tarr called the tax a penalty on innovation and job creation.

Democratic Sen. Karen Spilka of Ashland, a candidate for the U.S. House seat formerly held by Sen. Edward Markey, filed legislation earlier to repeal the tax. Spilka's bill would ask a special commission to recommend possible replacement revenue.

The state Revenue Department proposed new guidelines last month that officials said were aimed at narrowing the scope of the levy to lessen the impact on software developers and clear up some confusion over what services are taxed under the new law.