New Hampshire businesses have new tax worries in Massachusetts.
The Bay State last month imposed a 6.25 percent sales tax on computer design and software modification services, affecting Granite State companies that do business across the border.
The Business and Industry Association warned members about the “tech tax” yesterday, especially those located near the border.
The association said the tax could affect New Hampshire businesses both selling in Massachusetts and purchasing across the border.
“We want to make sure New Hampshire businesses are aware of this new tax and acknowledge that it could possibly impact where they choose to do business and from whom they choose to purchase goods and services,” BIA president Jim Roche said in a prepared statement.
The Massachusetts Taxpayers Association has described the tax as one of the most onerous of its kind in the nation.
The BIA is telling members, which employ an estimated 86,000 people in the state, to seek outside advice and counsel about what could be a compliance nightmare.
“It is unfortunate that this tax may unwittingly capture some New Hampshire employers,” Roche said.
Meanwhile, Massachusetts is changing the way it treats taxes for cross-border business such as legal, accounting and architectural services on Jan. 1.
Firms previously excused from income taxes when they did the bulk of their work for Massachusetts clients back home in New Hampshire, now could pay taxes in both states.
“The danger is there could be a form of double taxation,” said Chris Sullivan, a tax expert with Concord-based Rath, Young and Pignatelli. “This really affects service businesses.”
Both tax changes are beginning to get attention from the business community.
“People are just being alerted to these issues,” Sullivan said.
The “tech tax” is starting to get notice now because it just took effect July 31.
“There is a lot of controversy over this,” Sullivan said.
Both the taxpayer foundation and the Massachusetts High Technology Council are trying to get it repealed, he said.
A referendum question could be before Massachusetts voters next year.
Sullivan doesn’t rule out a legal challenge, such as resulted when Massachusetts unsuccessfully tried to compel New Hampshire businesses to aid in collecting sales taxes from consumers shopping across the border.
“This is kind of similar to the Town Fair Tire case,” Sullivan said.
There are economic considerations in the unfolding tax policy controversy.
Sullivan said some businesses may choose to relocate, if the policy hurts them.
“Companies could choose to move,” he said.