New tax in Massachusetts for "Prewritten Software Consulting"


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.’

The legislation was enacted on July 24, 2013 TIR 13-10 was published on July 25, 2013, and the new taxes are effective beginning on July 31, 2013.

For a new tax, how can they make it effective so quickly? Less than a week is not enough time for the public to make comments, let alone enough time for businesses to implement.

Is this a preview of coming events for software consultants and developers?

Glad I don’t live up in Massy-chussets. That looks to be a nightmare for anyone looking to make a living in that state. Having to put a premium on top of the existing purchase price of software? Ugh!

Hmm. I won’t comment on the lack of time for consultation. But what’s the issue with the tax itself? In just about every European country, the consultant would collect VAT in those circumstances. I know sales tax isn’t quite the same thing as VAT, but the mechanics of collection must surely be similar?


I make my living as a software contractor in MA. The problem with this law is that it’s vague, contradictory, subjective and confusing. It taxes certain activities and not others but the definitions of those activities are totally subjective.

Recently I wrote an Android app for a client. Android does not have a native ImageView class that supports pinch-zoom, so I used an open-source one. While the rest of the code that I wrote is nontaxable, some of the work of integrating and using the open-source class is taxable under the law, but which parts are a matter of opinion.

A retailer who sells a computer monitor charges a straight 6.25% tax on the whole thing. Under this new law it would be like if he had to calculate the tax based on details of what was inside the monitor - this wiring harness is taxable, that chip isn’t, this connector is taxable, that jumper isn’t. It’s insane.

A software engineer should be an expert in Java, C#, HTML5, SQL, etc. But now we have to be accountants and tax lawyers? And it’s not like we can even go to accountants and tax lawyers for advice - they have no clue about the arcane and esoteric details of software engineering.

I’m glad I live in Mass, because it’s the only state in the union where I can have health insurance as a solo-preneur with a pre-existing condition. But:

Agreed completely.

This is the first I’ve heard of this new tax, and I don’t know how to begin figuring out in which ways it applies to me :confused:

Edited to add: "computer system design services and the modification, integration, enhancement, installation or configuration of standardized software" – so does this mean if I build a WordPress, Drupal, Bootstrap, etc site for someone, I have to add tax, but if I build a site from scratch, I don’t? What if I create my own “standardized software” that I modify per client? And does it make a difference where the customer is living, or only where I live? (These questions are somewhat rhetorical, since I realize that no-one can give legal tax advice on a forum).

Some updates:

[INDENT]Thank you for sending comments to the Department of Revenue regarding TIR 13-10 and the sales tax on computer/software services. In response to the large volume of questions, the Department has posted answers to Frequently Asked Questions on the DOR Website at:

The FAQs will be updated as additional questions are received and reviewed.


I heard back from Representative Garlick. She’s concerned and seems her understanding of the law as written may differ from DOR interpretation. Here’s an excerpt from her email: [INDENT]My understanding as I voted (Massachusetts House of Representatives) is that this proposal does not tax:
· custom built computer software
· data recovery services
· website design, “the cloud”
· access to software hosted on a third party server
Further, the computer services tax included in this plan does not tax :
· downloaded music
· books or games
Additionally, this tax does not extend to many consumer computer services including technical support, removing software from a computer (for example, removing malware or a virus), or running diagnostics.
[/INDENT] I think “custom built computer software” and “website design” appear (in my interpretation) to be covered as taxable in the DOR FAQ, but this contrary to Representative Garlick’s expectations when she voted for it. Rep. Garlick is also “trying to schedule a focus group discussion in Needham with DOR to so that you may share more about business practices and any areas of uncertainty that you may regarding the legislation. I will keep you posted on a date, time, and location of the meeting. ” I told her this was an excellent idea.


And additional analysis and information:

It looks like this law is now in the process of being repealed: