“Tech Tax” Repeal Coming, Lawmakers Say, After Last-Minute Lobbying

9/12/13Follow @curtwoodward

The Massachusetts technology sector saw its hastily flexed political muscle pay off this week, as legislative leaders pledged to repeal a new sales tax on certain kinds of software development.

The “tech tax,” as it became known, was passed earlier this year as part of a major state transportation financing package. It extended the state’s 6.25 percent sales tax to purchases of customized software, and was estimated to be worth about $160 million annually for the state treasury.

Software developers and others in the state’s technology industry, however, recoiled at the new law. They complained that the tax unfairly targeted an important sector of the state’s economy, and warned that its broad wording could affect far more businesses than lawmakers intended.

Online campaigns against the tax sprang up immediately after its passage, aided by local business columnists, who called the episode a “fiasco” and said that politicians had thrown the tech industry “under the bus.”

The resistance was a big change from the industry’s previous approach to the lawmaking process—The Boston Globe in particular reported several times about the development of the software tax, noting that the tech sector was essentially absent from lobbying or conversations about the tax bill.

But in the end, that slow-motion start didn’t matter. Tech leaders sprang into action once they realized the tax man was coming, lobbying Beacon Hill and threatening to put the tax up for a public vote.

Politicians got the memo. On Tuesday, Gov. Patrick announced that he wanted to repeal the tech tax—a stunning turnaround for the lame-duck Democratic governor, since he’s the one who put the tax hike on the table in the first place by proposing a larger $265 million version earlier this year.

Legislators followed suit on Thursday, with House Speaker Robert DeLeo and Senate President Therese Murray announcing that the Legislature would be voting on a repeal measure soon. They’re not even planning to pass another, different tax to replace the money, eyeing budget surpluses instead.

It’s a huge political victory that didn’t really seem possible just a few weeks ago.

The whole adventure leads to one longer-lasting question: will Massachusetts tech leaders realize the industry needs to be engaged in legislative debates? It’s a decent bet that groups like the Massachusetts Technology Leadership Council, which told the Globe that it had “moved away from being a lobbying organization,” will see the wisdom in paying attention to Beacon Hill in the future.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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