GloucesterTimes.com, Gloucester, MA

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July 8, 2013

Tech service sales tax measure drawing questions

A bill designed to raise $500 million in new taxes for the state includes a controversial tax on some computer transactions — a measure that critics say could devastate businesses, but one that supporters insist is nothing to worry about.

As of Friday, the bill had been passed by the Legislature and was sitting on Gov. Deval Patrick’s desk awaiting his signature. The bill hasn’t been signed because the governor thinks it fails to increase the gas tax enough (it boosts the tax by 3 cents, with the increase tied to inflation) to compensate for revenues likely to be lost when some Turnpike tolls are eliminated.

The bill also increases taxes on tobacco products, but the most controversial part of the bill would extend the state’s 6.25 percent sales tax to a variety of technological services.

“Nobody knows what this bill will do,” said tax activist Barbara Anderson of Marblehead, who raised the alarm earlier this year.

But Rep. John Keenan, D-Salem, who voted for the measure, said criticisms of the tax on computer transactions are unmerited.

“Almost 30 other states have a similar tax,” he noted. “It is not intended to be a tax on computer services.”

Importantly, Keenan said, the tax leaves the average consumer out of the mix. It doesn’t tax repairs on your home computer, for example, and it won’t be levied when you upgrade your PC with a second hard drive. Nor does it tax so-called “cloud services.”

Instead, he said, the tax will impact computer system design and is aimed more at businesses. “This is a tax on computer products,” said Keenan. “If someone is working on software for you and they upgrade it. ... If someone is creating a new product for you, yeah, you would pay a tax on that.” He expects the measure to earn the state about $100 million.

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