After a regional outcry that could only rival New Hampshire’s “LLC Tax” a few years ago, Massachusetts House and Senate leaders said today they’ll push to repeal the so-called “Tech Tax” recently enacted by the Massachusetts legislature.  The announcement, along with Governor Patrick’s commitment to repeal the controversial tax pretty much ensures the death of the sales tax on software services that took effect only six weeks ago.  A significant number of Republicans along with an increasing number of Democrats in both chambers admitting the controversial tax now must go.

The measure, passed in late July as part of the $500 million transportation financing bill, immediately sparked an outcry not only from Massachusetts’ tech industry and several major business leaders, but also from out of state companies that would have now been forced to deal with a host of tax compliance issues because they have customers in Massachusetts.

Unlike the ill-fated New Hampshire LLC Tax of a few years ago where NO input was received from business leaders or tax experts, the Massachusetts Tech Tax was well vetted prior to passage.  Both DeLeo and Murray defended their action by doing their research before passing the tax.  Murray said recently that business leaders “changed their tone” about the impact of the measure only after it was passed.  Apparently, there are plans to bring the repeal to a still unscheduled formal session “by the end of the month.” Dan O’Connell, of the Massachusetts Competitive Partnership, admitted many in the business world “underestimated” how far-reaching the tax could be until it was made law.

In the meantime, for those who have withheld the tax on transactions occurring on or after July 31 of this year, the tax returns covering those transactions are due late next week.  So, what to do?  Depending on the volume of the business’ transactions and whether it is a monthly filer, you may not be required to file until October or even January.  If you have already withheld the tax and will pay it over with your August filing due next week, I am sure there will be some sort of procedure to obtain a refund on any taxes paid related to this tax.  That is all likely, of course, only if the pending repeal is retroactive back to July 31.  That will hopefully be the case unless Massachusetts lawmakers enjoy receiving phone protests, threats of a lawsuit and other not so friendly input from their constituents.

For more information and more specific guidance on how this whole process will affect your business, contact the tax professionals at Melanson Heath.