Massachusetts May Try To Tax the Cloud

CowboyRobot writes "A proposed tax in Massachusetts may affect software services and Web design and hosting. If approved, the state estimates the tax may bring in a quarter billion dollars in 2014 by expanding its tax on 'canned software' to include some elements of cloud computing. The tax would cover custom-designed software and services based in the cloud. "Custom" software includes the design of Web sites, so the cost to local businesses of a new Web site would increase by 4.5% on contracts to design the site, write Java, PHP or other custom code. The cost of site hosting and bandwidth would also be taxed."

Other than revenue, what's the motivation?

[Virtucon]

I am a bit confused since "custom" software may be developed outside of the boundaries of Massachusetts and its utilization, while using a network in the state would already be covered. Network Connectivity is already has taxes associated with it. Businesses clearly pay taxes in the state as well as do consumers. Software companies who write software working in the state pay taxes as well.

This looks more like an starting effort to obtain a franchise or privilege tax for using the Internet not a sales tax of any kind.

Re:Opposite effect

[roman_mir]

If somebody wants to start a new business in USA, they should definitely do it somewhere in Texas but even better, Puerto Rico [bloomberg.com]. If you start a company in Puerto Rico, they promise 30 years of no capital gains taxes, that's beside the business income tax of 4% and there is no federal US income tax.

So if you start a company and it becomes successful, you definitely want to be there, you can sell your business and pay no capital gains. Clearly they won't be following MA example with this nonsense either.

Re:Harmonising the tax standard ...

[Anonymous Coward]

Except for a couple things. First, I've never met a European who was happy about VAT. And two, at least in the UK, VAT was supposed to be a replacement for income tax, yet they introduced the VAT and kept income tax. VAT tends to go to the federal level, and sales tax tends to go to the municipality. VAT also tends to be much larger than sales tax, hence why it's considered a replacement for income tax, and not sales tax.

I'm assuming you're European since you talk with the standard "we know everything and what we do is how everybody else should do things" mentality, so you really have absolutely no understanding of a state level anything, though like the typical European, you probably think you understand it better than the people who actually live it every day, because you've read about it in a book. And I also feel the need to note, you've only mentioned that a bunch of other people do it that way, you didn't address so much as once on if it was actually a good way of doing anything. Just that lots of other people do it. And from what I understand, the answer really is, no, it's not. It does create the quite laughable European rush for the duty free shop however and lots of going to other countries where they do their VAT differently to buy cheap alcohol and cigarettes.

Re:Opposite effect

[ChrisMaple]

New Hampshire is already heavily politically polluted by its propinquity to Massachusetts. Please do not encourage more shit heads to move here from Boston and Cambridge.

Ah, yes. The state that brought us "The Big Dig"

[Lucas123]

Massachusetts' expertise at finding new things to tax is only surpassed by its ability to spend like drunken sailors. Case in point, the Central Artery/Tunnel Project in Boston, also known as Big Dig. The project, begun in the 1990s and completed in 2004, was the most expensive highway project in the U.S. When construction began, the Big Dig's cost was estimated at $5.8 billion. Eventual cost overruns were so high that the chairman of the Massachusetts Turnpike Authority, James Kerasiotes, was fired in 2000.The total expenses eventually passed $15 billion. Interest brought this cost to $21.93 billion. So, almost a 400% cost overrun. Oh, and BTW, the tunnels have been falling apart lately. One person was already killed by falling ceiling panels, and remediation work has been flourishing.