Tech Tax? What Tech Tax?

Innovation District Photo Uploaded by izzointeractive on Flickr

The hotly-debated “tech tax” could be getting tossed to the wind for good very soon has been repealed.

Governer Deval Patrick signed off on the repeal Friday, a day after the Senate voted 38-0 in favor of scaling back the software services fee that would have forced Massachusetts businesses to tack on the 6.25 percent sales tax to certain products developed for their customers.

Gov. Patrick signs the repeal of the software tax pic.twitter.com/hXVT3Cr0aq

— Charlie Baker (@MAGovArchive) September 27, 2013

On Wednesday, the House of Representatives got the ball rolling on the repeal after they voted in favor of  doing away with the proposal, which was originally an amendment slipped in as part of a larger $500 million transportation reform bill.

The so-called tech tax was meant to bring in an estimated $161 million each year to help the state’s transportation infrastructure by applying the state sales tax to developers.

Almost immediately after Patrick signed the bill over the summer, those in the tech sector came out of the woodwork and called for its repeal.

Now, that wish has become a reality. “We made a promise to revisit this measure if the sales tax on software services proved to be broader than intended. Today, we kept that promise. Through ongoing conversations with industry experts, it became clear that this sales tax was having an unanticipated negative effect on our technology industry and I am proud of the Senate for taking action,” said Senate President Therese Murray.

The repeal proposal was enacted by the Senate Thursday, before landing on Patrick’s desk to be signed.

The sales tax on software services was first proposed in January of this year as part of the Governor’s budget. After numerous conversations with businesses in the software community, and petitions being signed by industry leaders, it became evident to elected officials that that the impact of the sales tax was going to be a problem. “The business and technology industries in Massachusetts are top priorities in the Legislature and we are very proud of the work done by the Legislature over the past few years to support these industries and all businesses,” Murray said.

Patrick also backtracked his decision to sign the tech tax into law, and in September he called the tax a “serious blot” on the state’s reputation. Patrick admitted that it should be repealed in order to save face and continue to show that Massachusetts is an innovator and supporter of the tech industry.

Businesses in the tech industry applauded the Senate vote on Thursday. In a statement, TechAmerica representatives said the the computer and software services tax enacted earlier this summer would have had negative impacts on the state’s innovation economy. “The Commonwealth is one of the elite tech states in the country…this tax puts Massachusetts at a competitive disadvantage threatening that elite status,” said Kevin Callahan, TechAmerica’s Director of State Government Affairs for Massachusetts. “We’re extremely pleased to see that Legislators realized the dramatic impact the tax would have had on the state’s tech industry. We applaud them for banding together to ensure this didn’t happen and fully believe that Governor Patrick will follow suit.”