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September 13, 2013

Repeal of tech tax likely

Local legislators support elimination of new tax

The new sales tax on software and computer services looks doomed as Democratic leaders on Beacon Hill, including Haverhill state Rep. Brian Dempsey, said yesterday they support a repeal in the face of business opposition.

Dempsey, chairman of the House Ways and Means budget committee, said he supported repeal of the 6.25 percent tax, enacted as part of a $500 million transportation package this summer, once affected businesses expressed their opposition after the package was passed.

Momentum toward repeal snowballed this week as several top Democratic officials abandoned support for the tax, which business leaders worried would have a negative impact on the state economy.

Republicans, including state Reps. Bruce Tarr, R-Gloucester and James Lyons, R-Andover, filed a bill repealing the tax earlier this week. Gov. Deval Patrick, who originally proposed the tax in January as part of a $1.9 billion transportation and education plan, announced his support for repeal Tuesday. Yesterday, House Speaker Robert DeLeo, D-Winthrop, and Senate President Therese Murray, D-Plymouth, said at a news conference that they supported repeal and would schedule votes in their chambers.

Local legislators unanimously said they supported ditching the tax. Those who supported it originally cited concerns about its potential impact on Massachusetts’ thriving technology sector, and fears that the tax is overly broad and would hit businesses that not only produce certain software, but those that purchase and use it as well.

“Business groups that supported this early on said they took another look at it and felt it could be damaging to the commonwealth’s reputation as an innovation center,” Dempsey said yesterday. “They had underestimated this. Those groups said they were okay with it, and when they had discussions with their IT departments, that’s when new info and concerns were raised. We’re responding to that.”

State Rep. Linda Dean Campbell, D-Methuen, said a report from the non-profit Massachusetts Taxpayer Foundation that explored exactly what business and services would be subject to the tax and compared it to similar taxes around the country convinced her it was “the most onerous tech tax in the country.”

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