Tax on Drupal Development in Massachusetts

If you provide Drupal development services in Massachusetts, you may need to start taxing your clients. No, seriously -- this is our attempt to understand the new Massachusetts "Sales and Use Tax on Computer and Software Services" law, which was conveniently released on July 25th 2013 and went into effect on July 31st, 2013.

Seemingly out of the blue, Massachusetts has amended the recent legislation, "An Act Relative to Transportation Finance, St. 2013, c. 46" that specifies a tax on "computer system design...modification, integration, enhancement, installation, or configuration of standardized or prewritten software." A TIR was released that attemps to clarify the tax, but not really.

Here's our take on how the law affects us Drupal developers (we are by no means lawyers and you should contact yours to determine how this affects your business):

 

  • It DOES apply to any open source software services like Drupal sourced (purchased) from Massachusetts-based vendors.
  • It DOES NOT affect Drupal vendors who provide services from outside Massachusetts to clients in Massachusetts.
  • It DOES NOT apply to training, design, hosting, consultation and other practices that aren't directly related to the act of customizing "prewritten" software like Drupal.
  • It DOES NOT apply to sites built from "scratch" using HTML, CSS, JS, etc..
  • It DOES suggest that Massachusetts couldn't think of any better ways of funding their transportation projects (Big Dig anyone?) 

 

What's clear is that this law will upset more firms than just Redfin -- many of which are small businesses who are already overwhelmed with the challenges of running a business. Some taxes make sense and others just seem like a desperate, last-ditch effort to collect some extra cash using the hope-they-don't-notice technique. While Redfin luckily resides outside of Massachusetts, many of our awesome partners and clients do not and, at some point, we'll all be affected by this poorly-enacted ammendment.

We encourage anyone in Massachusetts or who has partners in the state to sign this petition or contact the state and let them know how this legislation will affect you and your clients. If you have any questions, this FAQ proved way more useful to us than any other publication.

 

We in Colorado had to fight

We in Colorado had to fight against laws like these. Let me know if you want to talk and I might be able to get you in touch with one of the people who lead the masses to testify to our state government.

What moron lawmaker thought

What moron lawmaker thought this up? Are they too stupid to realize all this will do is disadvantage Mass base drupal firms in favor of out of state firms which will hurt Mass? Unbelievable... You have to have a license to drive a car or catch a fish but they'll let any bonehead into govt (movie ref alert ).

Acquia is in Massachusetts as

Acquia is in Massachusetts as well?

> It DOES NOT apply to sites

> It DOES NOT apply to sites built from "scratch" using HTML, CSS, JS, etc..

What about if that site includes a library such as jQuery, or a service such as Google Analytics?

Yes, Acquia's HQ is in MA,

Yes, Acquia's HQ is in MA, however, my guess is that they aren't affected as much as smaller businesses who focus on development/customization. I believe Acquia focuses on services, consulting, hosting, etc., which is not covered by that law.

This is another reason why this law doesn't make sense. It's largely targeting smaller development firms and suggesting that, for some reason, building a custom theme is tax-worthy while training you how to build a theme is not.

My guess is that since you

My guess is that since you aren't directly customizing the jQuery or GA code, that it doesn't qualify. However, this is one of those grey areas of this law -- why would using jQuery to enhance your custom, "built-from-scratch" site be any different tax-wise from using Drupal, a pre-built piece of software, and using its functionality. It may be that when/if it comes down to it, that if you were to just turn a Drupal site on with a contributed theme, that may not count as taxable activity.

It's an interesting question because one could definitely argue that using JS to output HTML would be exactly the same as using a Drupal module to output HTML. There has got to be a similar discussion going on somewhere in MA -- anyone find anything interesting?