Saying they didn’t realize its negative impact on the software industry, Massachusetts Democratic legislators agreed yesterday to repeal the 6.25% sales tax on computer and software services enacted on Aug. 1 as part of a larger state tax bill to raise US$500 million in revenue for transportation projects.
This agreement comes several weeks after Democratic State Sen. Karen Spilka introduced a bill to repeal the tax, motivated by strong opposition from software industry constituents. The bill will be put to a vote when the first formal legislative sessions begin in several weeks.
Democratic legislators, as well as Gov. Deval Patrick, have been open to repealing the tax for weeks, but party leaders Therese Murray, the Senate president, and House Speaker Robert A. DeLeo remained holdouts until yesterday. They announced their reversal after a meeting with Paul Guzzi of the Greater Boston Chamber of Commerce; Daniel O’Connell of the Massachusetts Competitive Partnership; and John Regan of the Associated Industries of Massachusetts.
Republican legislators have been pushing for repeal since the tax’s inception, holding statewide business roundtables on the tech tax in conjunction with the software industry, and partnering with organizations like the Massachusetts High Technology Council.
“It is now evident that the impact of the tax is broader than any of us ever anticipated or intended,” said Murray.
DeLeo admitted that lawmakers didn’t realize the negative effects of the tax and its potential to stifle earnings in the software industry, a key facet of the state economy. The bill still needs to be voted into law, but all signs now point to a repeal.
“We’re going to repeal it and move on, and make sure that we send a message to those folks out there that we hear you loudly and clearly,” DeLeo said. “We heard your concerns, and we want to make sure that Massachusetts is still looked at as the innovation capital of the world.”