The New Massachusetts Sales and Use Tax on Computer System Design and Software Modification Services

I. Introduction -

On July 24, 2013, the Massachusetts General Court overrode a veto by Governor Deval Patrick and enacted an $800 million transportation bill entitled An Act Relative to Transportation Finance (the “Act”). The Act became effective one week later on July 31, 2013. This Act contains new taxes on computer system design services and software modification services.

On July 24, 2013, the Massachusetts Department of Revenue (“MDOR”) issued Technical Information Release 13-10: Sales and Use Tax on Computer and Software Services Law Changes Effective July 31, 2013 (“TIR 13-10”). This TIR (1) sets forth the new statutory language, (2) provides a broad overview of the type of services that might be subject to the new tax, and (3) introduces some administrative relief for computer service providers subject to the new tax. TIR 13-10 is authoritative. It “states the official position of the Department of Revenue, has the status of precedent in the disposition of cases unless revoked or modified, and may be relied upon by taxpayers in situations where the facts, circumstances and issues presented are substantially similar to those in the TIR.”

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