Do I need to collect sales tax for my IT consulting business in MA?
Effective July 31, 2013, the commonwealth of Massachusetts began taxing certain Computer and Software Services.
This means that people selling "computer system design services and software modification services" will need to charge and collect sales tax for the commonwealth.
Q: How do i know if my business is subject to the IT sales tax?
A: The key lies in the definition of the taxable services provided.
Massachusetts defines “’<strong>Computer system design services</strong>’, the planning, consulting or designing of computer systems that integrate computer hardware, software or communication technologies and are provided by a vendor or a third party.”
The new law also applies to the modification, integration, enhancement, installation or configuration of standardized software.
Q: How do i avoid the new sales tax? How do i get out of the new IT sales tax?
A: The best way to avoid these taxes is for your business to re-examine the nature of the services to see if your services should really be subject to the tax and also look at the timing of when you provided the services to see if they are not taxable.
The tax DOES NOT APPLY TO non-taxable personal and professional services such as consulting and evaluation services with respect to existing computer systems to identify deficiencies and needs, or services to prepare a business to use modified software, such as training.
ALSO, the tax does not apply to work done before 7/31/2013. For example, if your business sends a bill out today under a contract entered into prior to July 31, 2013, as long as the bill is for work done prior to 7/31/2013 than the invoice will not be taxable.
For additional definitions of terms like "pre-written software" and FAQ's, here is a link to the DOR