Monday, July 29, 2013

New taxes on computer & software services effective 7/31/2013

Tucked neatly into the new Transportation Finance Act (St. 2013, c.46, enacted July 24, 2013, see below) and followed by the Dept. of Revenue's Technical Information Release (TIR 13-10, published July 25, 2013), are new taxes on computer & software services which will be effective July 31, 2013.

SECTION 48. Section 1 of chapter 64H of the General Laws, as so appearing, is hereby amended by inserting after the definition of “Commissioner” the following definition:-
“Computer system design services”, 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.

SECTION 49. Said section 1 of said chapter 64H, as so appearing, is hereby further amended by striking out, in lines 232 to 242, inclusive, the definition of “Services” and inserting in place thereof the following definition:-
“Services”, a commodity consisting of activities engaged in by a person for another person for a consideration; provided, however, that the term “services” shall not include activities performed by a person who is not in a regular trade or business offering such person’s services to the public, and shall not include services rendered to a member of an affiliated group, as defined by section 1504 of the Internal Revenue Code, by another member of the same affiliated group that does not sell to the public the type of service provided to its affiliate, or data access, data processing or information management services; and provided further, that the term services shall be limited to the following items: telecommunications services, computer system design services and the modification, integration, enhancement, installation or configuration of standardized software.

The Dept. of Revenue says: “If you wish to submit comments or suggestions regarding the application of sales and use taxes to these computer/software services, please send them to  DOR also anticipates that there will be opportunity for public comment on a working draft of the regulation amendment before it is formally proposed.”