The Massachusetts Software Tax
fastcolabs.com
fastcolabs.com
Talk to your lawyer if you doubt me on this one, but Quill vs. North Dakota means that it is the well-settled law [+] of the United States that you cannot be liable for sales or use taxes enacted by a state which you don't have a "nexus" in. What exactly constitutes a "nexus" can be hazy, but the punchline for the overwhelming majority of HNers is that if you do not have an employee who performs work for you within Massachusetts you almost certainly do not have a nexus there.
Theoretically HN users who are also Massachusetts residents will have to start remitting use tax to the state to cover purchases of covered which they made from out-of-state merchants. It is an open secret that compliance in the US with use taxes is nearly zero.
+ Well, until they pass that threatened Internet tax legislation.
If you're a consultant who does work on-site for an MA client, that may also establish a nexus. In some cases it can do so even if you don't physically travel to MA, since the services can be deemed to have been rendered in the client's location. But others are deemed to have been rendered in the consultant's remote location. It's a little conceptually (and legally) unclear where remote services "happen", and seems to depend on the state and the service and the precise consulting relationship.
Here's an unrelated example in a notoriously insane tax state (New York). When is a pretzel a baked good, and when is it prepared food? The tax people often can't figure it out either.
http://www.bizjournals.com/albany/print-edition/2013/07/05/a...
Yes, but at least in MA, they pay when they get audited. Small companies may not be complying without audits, but anyone big enough to use invoice processing software is probably complying -- or at least, is actively ignoring prompts from their software to comply -- which controller/accountants/CPAs don't usually like to do.
You should generally file some amount each quarter (even zero), if only to keep the MA DOR off your back.
As a result, states will ratchet up taxes to cover their increasingly untenable budgets, as we've seen in Illinois (which recently almost doubled its state income tax) and Mass.
My guess is that this process will accelerate the internal migratory trends that are already in place. E.g. Nebraska, which banned defined-benefit pensions in the 1960's is sitting pretty with $43 of unfunded liabilities per person. Relevant to tech, the following states have big research universities (and thus a supply of educated workers) and also relatively manageable unfunded liabilities: Pennsylvania, Michigan, Wisconsin, Texas, and North Carolina: http://www.nasra.org/resources/Moodys1101.pdf.
See section Data Processing Services here: http://www.window.state.tx.us/taxinfo/taxpubs/tx96_259.pdf
Examples of data processing include ... web hosting, web site creation and maintenance; data storage, including offsite backup of electronic files; conversion of data from one type of medium to another... . Data processing services providers include sellers of software as a service and application service providers.
That would, for example, mean that a service like Tarsnap or Heroku would be subject to Texas sales tax, if they had a Texas nexus for sales-tax purposes, which isn't the case in Massachusetts even under the new law.
Is there any place where one can read about this/ any place where one can see data? Now that we are in the new normal and have seen cities like Detroit go bankrupt, maybe states are facing the chopping block as well (depending if they can still afford to make payments on their liabilities). It will be interesting to compare other places based on their financials as well.
EDIT: Alternatively http://www.suntimes.com/news/cityhall/21642911-418/city-defi....
Keep in mind that Detroit had loaned money from other states that aren't likely to get it back.
It's a pity that with all the hand waving over Open Gov initiatives that things like this are still buried, while I can easily find out all the different colors of street lamps implemented for the past 10 years for xyz neighborhoods…
Well I had an idea to convert the PDF's to text, so now i'm working on structuring it and filtering so maybe i can extract some values using some kind of financial dictionary/ statistics techniques.
Though a quick search has led me to find TIF Projection Reports for Chicago[0] from searching "debt obligation" in metro Chicago data [1], but I can't seem to find any past dealings (not sure how to look for it). I want to try to put the revenue generated from taxes (across different sectors if possible), servicing of obligations, population changes, and projected obligations in perspective, and compare to other cities/municipalities/states.
[0] https://data.cityofchicago.org/Community-Economic-Developmen...
[1] https://www.metrochicagodata.org/browse?limitTo=datasets&q=d...
There's gotta be money in opening this can of worms up, right?
This sort of thing is one of my interests and I even sort of enjoy digging through budget documents to root out these nuggets of information. Financial analysts and people like that do it too, but most of the general public is just not all that interested in such details. I used to think that if you simply put the information in front of people, a lightbulb would pop on over their head and they'd start demanding fiscal accountability. Turns out, much like environmental, development, and other long-term issues, that a lot of people feel overwhelmed and just tune out completely.
If it was just a matter of making the information available, then The Economist would be the most widely read newspaper.
My interests in trying to work with data like this came from my difficulty in finding data I could mine "easily" on municipal/city bonds as apposed to equity funds portfolio companies.
Part of me thinks that if some people were given a set of tools or a place they could go where they could make an more informed decision (with clicks of buttons and simple displays) about their 401k's, Roth IRAs, 403 B's or whatever investments they make if they don't trust typical fund managers, that they would be able to see there are tradeoffs to be made for their own fiscal stability. There seems to be a lot of interest with this surrounding micro finance /loans, but that is just one part of the equation.
That makes a lot of sense from a demand perspective for b2b, but that is kind of part of the problem I see when it comes to the direction money is flowing in now. And which apparently hides the misallocation of capital/resources from the public pretty well.
Also more importantly, I don't think I can provide much value to the institutional folks, but I've been doing something similar for family and friends recently for free out of curiosity, and I figured maybe with a little work, I could convert pdfs of muni/bond data to text/html, extract things of value (using a key phrase dictionary for financial terms) and combine them with sources found in a more automated fashion online to make something that could help.
I'm not trying to make a political point, but there are certain states where the knee-jerk reaction is all too often to increase taxes - or to tax unpopular things like cigarettes - rather than take a look at the budget and see if there's a middle ground.
Knowing that you're covered in case anything goes wrong is enough to make the taxes worth it.
Every American benefits from the fact that we can dictate terms in nearly any interaction with other countries. It's a huge aspect of our political dynamic that most Americans take for granted, because they have no experience with a country where the democratic will has to be tempered by considerations of how military superiors will respond.
I can buy that some proportion of military spending is therefore for protection, but the actual amount of military spending seems considerably higher than the amount needed to keep the U.S. from being colonized.
> I would prefer to pay for services I use
I invite you, sometime, to think about which services you really use, and try to figure out how much it would cost to purchase each of them if you were doing so on your own. Don't forget: police protection, fire protection, military protection, paved roads, functioning traffic signals and signs, groomed parks, trash collection (some places), up to sixteen years of education, enforcement of workplace safety standards, financial protection if you become suddenly disabled, a legal system in which to resolve disputes. I don't know what your specific situation is, but just about everyone benefits from those government services in the U.S., and you personally may benefit from many others. I'm guessing that purchasing the first three alone, as an individual on a private market, would probably outrun the total you pay in taxes.
You could lower the individual costs to you of a lot of these by finding a bunch of other people who also need these services, and pooling your money to buy them together. That's just how democratic government begins.
> have the money stolen from me by force
This is a dishonest characterization of the authority of a democratic government to levy taxes. Yes, if you don't pay taxes you owe, someone might come and take your property, and those people might have weapons or threaten you with imprisonment. But that is a measure of last resort, which will surely only be taken if you fail to respond to a long line of more reasonable measures. It does a great injustice to people who actually live under oppressive regimes to compare the collection of taxes under a democratic government to the kind of arbitrary, might-makes-right authority those people are subject to.
Furthermore, by characterizing taxes as 'stolen' money, you are implying that you somehow have an absolute or natural right to have it. Why do you think that? No matter what you do for work, the amount of money you take home is not the product of your exclusive efforts. It also depends on the protections you get just by living in a society that provides some of the services I listed above. You would take home a lot less if, for example, you couldn't rely on the police and legal system to prevent armed bandits from plundering your place of business whenever they please. You'd also probably be a lot less productive if you had to worry about such things on a daily basis. There's a lot standing behind 'your' money that isn't yours, by any reasonable measure.
> while people pretend it is moral because it is called "taxes".
A democratic government's authority to levy taxes does not derive from the name, nor from the force that it can, in extreme cases, use to collect them. Like the government's other kinds of authority, it derives (most people think) from the consent of the governed. Behind that phrase are some important and difficult questions, to be sure. But you are not helping to answer them by characterizing taxes as 'stolen' and 'immoral'.
First of all the comment he was replying to was talking about services like housing, transportation, and healthcare, which already are provided by the market and aren't really things the government has any advantage in. As for all the stuff it does pay for, at best it costs exactly the same amount as you have to pay in taxes. But the government spends money on a lot of other things with your taxes that don't really benefit you. So you would save a decent amount of money. And with no competition, the services they do provide cost a lot more then they probably could.
>You could lower the individual costs to you of a lot of these by finding a bunch of other people who also need these services, and pooling your money to buy them together. That's just how democratic government begins.
This applies to any service. Anything from food production to software development. A lot of people need those things, and they could cut costs if they pooled their money together for them.
>This is a dishonest characterization of the authority of a democratic government to levy taxes. Yes, if you don't pay taxes you owe, someone might come and take your property, and those people might have weapons or threaten you with imprisonment. But that is a measure of last resort, which will surely only be taken if you fail to respond to a long line of more reasonable measures. It does a great injustice to people who actually live under oppressive regimes to compare the collection of taxes under a democratic government to the kind of arbitrary, might-makes-right authority those people are subject to.
He was definitely using words with bad connotations, but technically it is true. Everyone pays their taxes to avoid having their property stolen or going to jail. The fact that force isn't applied unreasonably doesn't mean it isn't there.
>Like the government's other kinds of authority, it derives (most people think) from the consent of the governed.
There are people that don't consent. At best you could say the majority consent. You can justify it by saying it's better than any other system we know of, but not that people consent to it.
So one way to look at the issue is, which costs me more: individual purchase of exactly the services I need, or public purchases of those services plus others that I don't?
This is an empirical question, and the answer depends both on what I need and what my government is currently spending money on. But in general, I think it's very unlikely that the first option could ever be cheaper, for most people and most government-provided services. This is because buying these things privately would mean I have (a) almost no bargaining power, and (b) much higher costs associated with coordinating my purchases with the needs and desires of other people.
> This applies to any service. Anything from food production to software development. A lot of people need those things, and they could cut costs if they pooled their money together for them.
I think this is actually a good starting criterion for deciding what the government should and should not pay for. The government should not pay for what I can get more cheaply or more efficiently by acting as a private individual. That doesn't mean it should pay for everything else, of course. But if sufficiently many people would benefit from something, and they can get it more cheaply by purchasing it together, there's a good case to be made for public investment.
Figuring out the line between what the public should buy versus what collections of private individuals should buy is a really hard problem. It's not always a matter of simply asking "is it cheaper if everyone pays in, or just the people who need it?" One of the benefits of a democracy is that we can have an ongoing public conversation about just where we want to draw that line.
> The fact that force isn't applied unreasonably doesn't mean it isn't there.
I agree. My point was not that the force isn't there, but that it is not the source of a democratic government's authority to levy taxes, and accordingly not the only reason that its citizens pay them. A government which people only obey because of the threat of force is an oppressive regime. I am fortunate not to live under such a government, as I think most people commenting here are too.
> There are people that don't consent. At best you could say the majority consent. You can justify it by saying it's better than any other system we know of, but not that people consent to it.
This is one of those difficult questions I spoke of. Obviously, most people do not explicitly consent to the authority of a democratic government. On the other hand, I'm not so sure it's clear that there are people who don't implicitly consent. Even people who disclaim support for the government usually don't take all possible measures to avoid its authority and benefits.
But actually, I agree that 'consent' may not be the right concept for explaining the source of the authority of democratic government. Still, I think there's something right about the consent idea, and I don't think it just comes down to our not knowing of any better system.
Healthcare is one area where a collective (i.e. by the government) approach has a definite advantage. Privatized health care and health insurance is a lot more expensive. The US has the highest medical costs in the western world, yet many people are lacking very basic medical care.
The second most expensive country (at roughly half the cost per capita) is Netherland, where health care is semi-private, semi-government, and health insurance is private but regulated and compulsory in order to provide a uniform standard for everybody. And surrounding countries (where it's cheaper) have better health care at least in some areas.
I don't have numbers, but I expect that the cheapest and highest quality medical care in the western world will be in some country where health care is strongly dominated by the government.
> Everyone pays their taxes to avoid having their property stolen or going to jail. The fact that force isn't applied unreasonably doesn't mean it isn't there.
Just like everybody doesn't steal from their neighbour or kill people who anger them in order to avoid going to jail. That doesn't mean there's anything wrong with taxes; it means we live in a civilized society with some basic standards of behaviour.
> There are people that don't consent. At best you could say the majority consent. You can justify it by saying it's better than any other system we know of, but not that people consent to it.
The same goes for any law. I'm sure there are people that disagree that theft or murder should be illegal. Or slavery, for that matter. And those are the extreme cases. For every law, there are some who don't agree with it. Should every law only apply to those who agree with it? Laws would lose their meaning.
Health care in the U.S. generally costs a lot more than government-run health care in other western countries.
The Current US System is the Worst possible system a culmination of decades of government interference in both employment laws which is irrevocably linked health "insurance" with employment and turned "insurance" into a services prepayment pozi scheme.
Government run systems control costs by having a Fixed Budget, which means each year they outlay X dollars, so if for example there are 100,000 Hip Replacements budgeted for the year, and your Number 100,001 well your SOL. This is called rationing... this is one way government control costs. the other is ignoring or limiting patents for drug companies, so drugs cost less overseas then in the US. There are 1000's of things like this that make the government run systems appear "cheaper".
Cost is not the only factor though, Quality of Care is very important and the US still has more Health Tourists than any other nation... there is a Reason for that.
The US is the example of the most privatized health care, and it's almost twice as expensive as the #2 most expensive country. That #2 country has a semi-privatized system.
Those services make up a fairly small portion of government spending. The really vital portions [1] are even smaller.
Most government spending is merely wealth redistribution.
http://www.usgovernmentspending.com/piechart_2011_US_total
[1] Vital: protecting the US from Russian invasion. Non-vital: drone strikes on random Pakistanis. Vital: protection from bandits. Non-vital: war on drug users.
So what should we spend our money on? This is a policy question, and fortunately one which (however indirectly) we each have a say and a stake in. That is also what makes answering it a very messy process.
But answering it presupposes the principle that taxation by democratic government is legitimate. This is the principle which thecodeore was casting rhetorical aspersions on, and that I was defending.
http://en.wikipedia.org/wiki/File:Fy2010_spending_by_categor...
19.63% for generational theft, which I pay into but will never see a penny of.
18.74% chiefly for killing brown people on the other side of the planet, generally people who were not a threat to the U.S.
16.13% for programs that are like basic income except that they create awful incentives, are vulnerable to fraud, and have high administrative overhead (mostly people trying to stop the fraud?).
12.79% for health care for the elderly. This program is actually pretty effective, if we ignore the bit where health care providers dramatically overcharge people who do not use it to make up for being underpaid by those people who do use it. It's also questionable whether it will exist in its current form 40 years from now.
It makes sense for me to look at the federal budget because I pay very little in state and local taxes. People who pay more state and local taxes generally end up spending it on paying CHP staff $400,000/year or ensuring that teacher pensions return 8% year over year when no investment on the market does that.
Given this state of affairs, it's not unreasonable to think that you could make some substantial savings when purchasing the services you would use through means other than an annual mugging.
We can agree that some of the actual budget allocations of our governments are not ideal. That's not the point. (See what I said in response to yummyfajitas elsewhere in this thread: https://news.ycombinator.com/item?id=6196119) The point is that taxation is not theft, and characterizing it as such unhelpfully distracts from the real and difficult problems of self-government.
I live in the United States. If I do not pay my taxes, I will be kidnapped. If I resist kidnapping, I will be murdered. This is why I pay my taxes. I do not pay my taxes because I want to kill brown people on the other side of the planet, or because I believe that a government has a right to unilaterally create obligations on my behalf (and for ten years after I renounce my citizenship!), or because I believe marijuana users should be locked up and sodomized.
Given that we will not rid ourselves of taxation in the near future, some ways of spending that money are better than others, and it's worthwhile to talk about that. There may even be a few policies that are so beneficial that they justify theft.
Edit: I suppose the actual useful difference in perspectives here is about how the policy debate should look. I believe that each policy decision that increases or maintains spending should have to overcome the weight of the injustice inherent in funding it. Many other people believe that there is no such injustice, so policies that provide only a mild benefit when compared to privately allocating the same funds should also be implemented.
You are correct in I do not exist in an island, however I do VOLUNTARILY exchange my labor for goods and services, this is society, not the immoral democratic structure you call "government". Government is a vile, evil entity that seeks to destroy society not build upon it.
>police protection,
Police are not today, and never have been a protectionarly unit, you can not cite any case law, or evidence to support that belief, if they were there would not be the need for self defense, private security, and entire industry producing goods and services for protecting one's self
Police are a Harassment and control mechanism for the state to force arbitrary laws and regulations passed by special interests, the majority or other such groups. They are nothing more than a gang of thugs.
>fire protection,
Historically Fire Protection was provided quite well and for a much lower cost privately, infact come counties are going back to that model.
Today I live in a Region with a 100% VOLUNTEER fire protection services that is supported by VOLUNTARY DONATIONS by the community, instead of violent forced collections. Our fire services is the best in the region with faster response times then the surrounding areas where they are paid to sit on their asses all day with money stolen from the community.
>military protection,
Most of the Military Budget today is used for Unjust and immoral wars, and immoral surveillance. I, just as our founders, do not believe in a Standing Army.
>paved roads,
A good % of roads are PRIVATE roads, further public roads can be funded exclusively with user fees which I have no problems with, as if your using the road you should pay for them, however they should not be funded with Income Taxation, Property Taxation, etc.
>functioning traffic signals and signs
See Above
>groomed parks,
Parks are not a proper role of government, I have never used a City Park, have no desire to use a City Park, and my money should not be stolen from me to pay for a city park
>trash collection (some places),
I have a private collection service that I pay monthly
>up to sixteen years of education,
Calling government schooling an "education" is laughable at best
>enforcement of workplace safety standards,
A System of Strict liability would be better for that
>financial protection if you become suddenly disabled,
I have private Long and Short term disability insurance, even if I did not that should be done via community charities not through the forced taking of other peoples money
http://www.youtube.com/watch?v=PGMQZEIXBMs
> a legal system in which to resolve disputes.
The legal system should be paid for by the people that make use of it.
That said, there are a number of externalities that you're not thinking of. The simplest is: without a government, what's to stop someone from walking into your house and killing you? Every incentive says they should: free money, no consequences.
Another is: if we privatize everything, then only the wealthy get the benefits of having a society. Privatized workplace safety enforcement, for example, would ensure that only those rich enough to afford a lawsuit could get justice if injured in an unsafe environment. That's just stupid.
I am more than likely your Senior, it is infact youth that believes that government is required for a functional society, that government some how makes society better with age comes the wisdom to understand the true evil of government
>That said, there are a number of externalities that you're not thinking of. The simplest is: without a government, what's to stop someone from walking into your house and killing you? Every incentive says they should: free money, no consequences.
Watch this...
>You want to make everything you do voluntary yet think that it will somehow lead to a world where everything is rainbows and unicorns,
Not at all, infact it is statists that believe in Utopia, believe that if they use "just enough violence" they can force everyone to behave as they want.
2. Can you provide the slightest evidence that what you advocate turns out any way other than somalia? By this I mean actual historical evidence... not hour wishful thinking or ranting about force and violence. Evidence is not the same as you letting out your opression fetish. No one cares how you get off, we just want evidence of your idiotic claims.
Incidentally, Vanuatu is a place with zero income taxes (unless you're a landlord), happy people, and good weather. Perhaps you should consider moving there if you want a strict user-pays-for-service system?
Compare: whenever a commenter mentions property, user proudhon99 shows up to write a one-line comment that property is theft. Yes, he legitimately believes it, and his position is actually less absurd than the libertarian's, but comments that could be replicated by parody bots are not that useful.
I've had the misfortune of having to deal with the police of two different police departments this year. In the first instance my car was stolen, in the second someone ran into my car that was parked on the side of the road. In both instances the Police were totally incompetent and arguably caused me more financial damage than the criminal and the out of control driver.
Here is how; Once the Police "recovered" my stolen car I had to pay their towing company of choice about $400 to get my car back. In the second case they have taken over a month to issue the police report about the accident; my insurance company won't pay to have the car fixed until they have the report so I've had to front the costs in the mean time and hope that they get their act together at some point.
I think I would have been better off in both situations if there had been no police and my taxes were a bit lower.
Social Darwinism went out of fashion about 60 years ago. In part because its philosophical underpinnings had little to do with Darwin or evolution.
For example, an alternate view is that taxes are part of kin selection, in that those people who pay more taxes end up with a social system which is better at raising successful children who continue that culture and practice.
For example, "murder" is nearly always defined within the context of human-human interactions, but "apex predator" is usually thought of on the species level, as in "humans are apex predators" not "David Hasselhoff is an apex predator." It's disingenuous for you to change contexts like that.
Darwin discussed the idea of kin selection, and how it applies to sterile honey bees. Why should a sterile bee support the group when it passes on (in modern terms) none of its own genes to its children?
Under your thesis, why don't those bees take the 'virtuous' route and attack the other bees, eat the honey, and otherwise destroy the colony? What's in it for them to not do that?
I am not so reductionist as to say that human actions can be mapped directly to kin selection, but I think it's an important factor. We also have cultural biases which have an influential effect. It's generally easier to have a civilization where you aren't worried all the time that people might murder you or your family, so energy that might otherwise go into protection and defense can be used for other things.
If you disregard the reasons for why a killing might not good for an organism, then you disregard a vital understanding of Darwinism.
We tend to "project respect" onto animals that could kill us, certainly, and some apex predators fall into that category. But some apex predators do not, and other non-predators do, and my observation is that size and danger to us are more important to our sense of respect than for the species being an apex predator.
Electric eels, largemouth bass, and loggerhead sea turtles[1] are apex predators, within their respective environments. Do we respect as much as we do polar bears? No, we respect them less. Do we respect them as much as we do a rhinoceros? Again, no, despite rhinos not being a predator.
We respect horses, elephants, and rhinos, which are herbivorous and definitely not a predator, apex or otherwise. How is our respect for these large and potentially dangerous animals any fundamentally different than for an apex predator? I certainly place a rhino higher than electric eels on my list of animals to stay far away from. I get no sense that there are different categories of respect based specifically on being an apex predator.
Gorillas are mostly herbivorous but sometimes eat meat, and adult gorillas have no natural predators - are they apex predators, and do we respect them for their 'expensive kills'? No.
We certainly respect the Andean Condor, that being a national symbol of Argentina, Bolivia, Chile, Colombia, Ecuador, and Peru. Adults have no natural predators, but it's primarily a scavenger and not a predator. Your thesis, however, is that our respect for the condor is fundamentally different (and lesser?) than that of the bald eagle. I don't agree. Can you elaborate?
Nor do I accept your use of the term "advantageous behavior." You focus on its use for killing, but advantageous behavior also applies to vultures scavenging from a carcass, for squirrels eating seeds, for dung beetles which consume feces, and for the phototropic effect in plants.
That is, you correctly said that 'in the state of nature killing is morally neutral'. My complaint is that the better statement is 'in the state of nature everything is morally neutral.' Focusing on the narrow topic of killing reveals more your own fascination for that one issue than anything else.
[1] Loggerhead turtles are an apex predator in Florida Bay http://www.aoml.noaa.gov/ocd/sferpm/fy02/Schroeder02_abstrac...
Advantageous? Yes. Virtuous? Nature stares at you, blinking.
Yes you can go far enough and find "indirect" benefits to anyone for anything, but you have to stretch it quite a bit.
Besides my point is even if a group of people went into the wilderness and declared independence, the government would still go after them and have power over them, even though they aren't consuming any government services at all.
Taxing spending on harmful things is better than to tax work and activities because what you tax will diminish.
WWII wasn't about who was right, it was about who was left. To the victor went the spoils. Meanwhile, there was a war to pay for, hence the high tax rates.
This minefield of regulations about what's taxable and what isn't will just make it much more expensive to sell things, as people pay for lawyers/accountants to figure out what "tax" to add to every outgoing invoice. Since this will decrease consumption, it will reduce other tax revenues, as well as making this pot smaller.
Mad. Stark Raving.
I'm also confused because it seems that most of the reasoning is that companies sell the software for cheap and then make the service contract expensive. I've seen this done by companies like Autodesk and National Instruments for sure, so I can see why they'd dislike it. I design custom equipment, and I'd be tempted to do the same (charge at close to cost for equipment and charge as a service for labor). But this seems like an incredibly poorly conceived way to fix the problem that will cause more issues than it will address, and it's surely not limited to software. I could pull the same trick in any kind of contract work.
If the software is cheap, it is expensive to service it.
However the "Sell software cheap and then charge for service" is the OPEN SOURCE MODEL, where the software is given FREELY, and if you need professional help you have to pay, that is certainly not the model Autodesk uses.
I don't see how it being the open source model is relevant. I'm not judging the validity of the practice, this is literally what the representatives claimed the logic was.
The proposal was to replace all provincial sales taxes with the GST, and to apply GST to everything, to keep it super-simple to implement. Well the provinces hated the idea, and the tinkerers just had to have exemptions added for various reasons. The result was that there were two sales taxes in Ontario, each with a complex set of exemptions. The popular example was that buying five donuts was taxable, because that was "dining", but buying six was exempt, because that was "groceries".
Not quite easy but if your business turns over more than £79k then you will have registered for VAT in the UK.
A US state VAT system would, presumably, result in a matrix multiplier (52 by 52 or whatever the number of different rates are) and require companies to track transactions in the various states.
In the EU, if you're British and buying from Germany, you pay German, not British, VAT rates - they should copy that.
Agreed though, that British VAT isn't as simple as it could be (whole categories exempt, etc.)
The rule of thumb is that VAT is a tax on consumers, not businesses. Of course there are hundreds of exceptions to that.
If you are a British company buying services from Germany then the seller shouldn't charge you a penny, then you charge the British VAT on the purchase and then deduct it if only the purchase is related to _your_ taxable sale(s).
But if you are a British consumer then the seller should charge you the German VAT.
That's the general case, there are exceptions to that and exceptions to exceptions so don't bite me please :)
By the way, the national VAT bills have to be complex simply because they are meant to mirror the EU directive: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:...
http://taxfoundation.org/article/state-tax-collections-capit...
Part of that is having both a sales and an income tax. Some states have one or the other.
Per capita income minus dollars taxed or the ratio of the two might be a better measure than either of ours for what you're trying to get at.
Point being, the rates are low and could easily be added to without dumb-ass industry specific things like this.
This sort of software is in something of a hazy middle ground between shrink-wrapped software on the shelf and IT consulting services. Taxing it may seem dumb to us when compared with other states, but probably seems like a reasonable move to at least consider to most.
When we started we were compatriots with many such contractors in the city. They said, confirmed by our accountant, that our services were not PST eligible so we collected and submitted only the federal GST. This we did for 5 years without any incident; like an audit from the province.
In 2004 our business failed and we were in the process of closing up shop when the feds audited our GST history and found that in 2001-2004 our GST submissions were off and we owed about 30k incl interest and files. We made arrangements to pay the bill. Painful but under control.
But, the federal audit triggered a provincial audit and that's when we discovered that the rules for PST regarding software/it services had changed during our run, making the work we did subject to the 8% PST. The rules for that are eerily similar to those described in the OP.
The provincial government determined that the changes to The Act were retroactive and covered all the business we ever did and that with interest and penalties we owed over 700k payable by the end of that week or they would take action. The company was broke so he action we were threatened with was that, as officers of the company, we were personally liable for the amount and that if not paid by the end of the week, our personal bank accounts would be frozen. This was not good.
Further we found out that at that time, these rules were only enforced when a PST audit occurred. So, when we told the many contractor pals in town that this could be a problem for them. a) they didn't believe it, and b) AFIK none of them changed their practice of collecting only the GST.
Anyways, there was a loophole where a customer could assume the liability for the PST by giving us a waiver form. Luckily the majority of our work was with one customer, a huge corp, who agreed to do this and we were off the hook.
It was a very stressful week.
PS. I have not done any consulting since 2004 so I am not aware of any subsequent changes to The Act. AFIK, none of the contractors I know were dinged the way we were. I figure that harmonization of the taxes means they are collecting tax for both govt entities now.
[added] The definition of "taxable service" may or may not have applied in our case. We were without resources to challenge the fact so as far as we were concerned the ruling and payment demand would stand as presented. The mega corp was so large that they had a legal department devoted to minimizing tax and this was just one more thing that department dealt with. A very small thing in relation to the overall dealings of the customer.
Honestly, the gov't folks are playing whack-a-mole here trying to keep up with fast-growing areas that don't fit the old "you sell this widget for $X" model they're used to. And so they're going to write overly broad rules as they don't understand technology and related industries. There is no intrinsic reason that SaaS should be free of tax and so the more worrying aspect of this legislation (NY has similar) is that it is so difficult to understand and open to interpretation and the mental tax it imposes on businesses who live in a cloud of of uncertainty about how they should treat their revenues.
That said, I think the idea that it will drive biz out of the state is naive. California is not a particularly biz friendly state in terms of taxes but the Valley and even LA seem to be doing just fine.
I suspect many other small start-ups will make the same choice we did until this all gets sorted out.
Personally I read that it's kind of like sales tax, and buying online. If the seller doesn't do business in the state you reside it's up to the purchaser to pay the tax.
My understanding is "rewording and clarifications" are coming. I know my client (employes hundreds of people) has unleashed a bit of hell over this -- we will see what will happen.
It's a game of wack a mole, and like all arcade games, they end pretty quickly when you can no longer put any more coins in.
Why not tax something that no one likes that can't move out of state - TV and radio ads?
I provide editorial and publishing consulting - I don't write code to sell, but I do configure and patch other people's code. Am I covered by this law? Well, I guess I am.
Easiest solution for me: don't accept clients in Massachusetts.
The point is that you make it clear why your customers are being charged extra. It's then up to them to contact their local representatives and ask them to change the law. If you're not based in MA, it's not really your problem. Sucks for businesses in MA of course.
Welcome to being a large enough part of the economy to attract political attention.
Love, the energy industry
The US just became a little more EU. Congratulations!
EDIT: I meant 'import tax' where I wrote 'income tax'. Sorry for the confusion.
The people this impacts are those currently consulting for MA clients in a capacity that was not considered software sales previously, but now might be. For example, if you sold an analytics package in boxed software, that was always clearly a "sale" and is unchanged. But if your business is based around, for example, having a free SaaS analytics service, along with an offer that enterprise clients can pay you to get a self-hosted version installed on their own servers, that has typically been treated as consulting in MA, but is being reclassified as selling software. The theory is that you are basically selling software (a copy of the analytics package), not really consulting, and the fact that you didn't put it in a box with a bar code is irrelevant. The complaints are largely based around the vagueness of the definitions and the short notice of implementation.
So if that's accurate, it makes perfect sense. Of course, crafting a law that actually targets this and this only is extremely hard to do, and the short notice here is ridiculous.
But if that's the actual motivation behind the law, it's just a case of where do you draw the line between selling products (taxed) and selling services (not taxed)? Of course there's a gray area between them.
Then the consulting firm would pay the sales tax when they buy the software (before tweaking it).
Sorry, but taxes are not theft in any general way, by any stretch of the imagination.
If you do not pay your tax, violence is threatened and will be brought upon you if you do not comply. This is theft. It does not matter if the thief uses it for altruism. It does not matter if the thief forces roads and other services upon you by outlawing competition.
The fact remains that the initiation or even the threat of violence against an otherwise peaceful person is wrong, and trying to argue otherwise is an indefensible position.
You could also go to a nation in sub-Saharan Africa where there is in effect no government. No taxes! Except for the armed bandits which will take away all your stuff. But surely you can pay out of pocket for a professional defense force to take care of that problem.
In practice, private companies don't need to maximize profits at the expense of poor. In Russia, for example, ISPs are competing hard against each other and internet is dirt cheap, you could have a 30mbps connection for around $7/mo. No regulation.
But suppose you're right. Suppose companies would maximize profit and the way to do it would be by not providing service to poor people. It doesn't make it okay to steal money (in the form of taxes) from me. Ask me nicely and give me a REAL option to not pay, and I may as well pay even more than required. But IRS are not nice people. They make people's lives difficult at the slightest hint of tax evasion.
There is a middle ground between Somalia and Sacramento, believe it or not. It's where most people prefer to live.
Just try to imagine how a society without a government could function and still have all the things we currently have. Try to come up with solutions. Think about the demand side of the equation. Just for once, try to imagine how to organize things in a world where it's, for some reason, impossible to create a government. You'd be surprised of your own ingenuity.
Likewise, people who gripe about taxation fail to recognize that it's an important, though often annoying process. The number of essential government services that you use everyday, even without leaving your house is surprisingly high.
What's more, this concept that we should leave everyone to fend for themselves and should simply ignore those who are less fortunate borders on sociopathy. I, for one, take comfort in knowing that even if everything in my life falls apart, there are some basic social safety nets in place to keep me from starving to death of the streets.
Actually, it borders on something we call "nature." Whatever position we take about nature, what we can't do is ignore it.
The antipode of nature would be a society in which there really is a social safety net that isn't temporary and discretionary, absolutely reliable, and not means-tested. Such a thing would collide with reality, the collision would be spectacular, and reality would prevail.
> I, for one, take comfort in knowing that even if everything in my life falls apart, there are some basic social safety nets in place to keep me from starving to death of the streets.
But there is no such thing, not in the way you seem to think. If such a net existed as more than a limited approximation, it would be destroyed by overexploitation.
Human societies live in nature, and nature is in charge. Nature doesn't waste anything. The human reproductive capacity is limited only by available resources and premature death.
> The number of essential government services that you use everyday, even without leaving your house is surprisingly high.
Yes -- and the number of ways that government can misuse or waste tax revenues is surprisingly high.
I recommend a skeptical attitude toward government and hypothetically perfect social safety nets.
You're young -- you'll figure it out. “Show me a young Conservative and I'll show you someone with no heart. Show me an old Liberal and I'll show you someone with no brains.” ― Winston Churchill
For example, many people will sneer at this tax yet cheer on other taxes they don't have to pay.
This "test" is hilarious!
If stores could not determine how much merchandise you had in your cart, more people would shoplift. So prices in stores are theft! If you could not determine if someone else drove your car, then your neighbor might sneak a joyride. Your owning a car is theft!
> My guess is that 90% of people who preach about the social contract and helping the poor would keep the money.
And if we replaced the social contract with private contracts, nobody would ever cheat on those, right?
An unenforceable law is a bad law. Good laws are designed to solve problems like free riders or production of public goods in a way compatible with rational self-interest. It is not hypocritical to act in your self-interest while simultaneously supporting the rule of law.
Let's not mistake the fact that people don't like taxes for some sort of deep, abiding flaw in the legal situation.
(Now, the complaint that implementation was too sudden, that's totally valid. They should have had a several-month gap between passing the law and the tax kicking in.)
In this case, though, they are charging sales tax on some services (that's what the law is about). It has to do with services tied to "goods" or pre-written software. So, integrating, customizing, installing, etc.
I believe that this is the area that might get amended or clarified soon (I have written the MA DOR about it, as I know many have). They need to clarify the line between bespoke and pre-written but customized a little better.
Also, I've heard a few time (but don't know if it's true) that this law is modeled on laws in 24 states. If true, then a lot of people on this list are probably supposed to be dealing with this already.
That is why the Federal government's response to the Detroit bankruptcy is so important. Are the rest of us going to be on the hook for the unfunded munis or not?
Sounds like the solution is pretty obvious. And I doubt anyone will miss Boston winters.
If they apply this tax towards STEM education, then the benefit might be worth it.
But yes, it is a net negative....I just don't understand why they would do this. They should be offering incentives to stay there. This is a self-invoked brain drain.
When the other shoe drops, the money is going to come from somewhere or the state will go bankrupt.
Most lawyers spend time working on client's problems, not "argue all day".
Lawyers bill their time often in 5 minute increments, and only charge for time they are actually doing something.
If the average engineer sat down and tracked what they did every 5 minutes of the day, i think you'd find they are a lot less productive than they think.
But your right, we should look to Congress because they are actually quite productive. Majority of them have a background in political science and law.
http://www.fas.org/sgp/crs/misc/R42365.pdf
http://www.senate.gov/CRSReports/crs-publish.cfm?pid=%260BL%...
I'm not sure what congress has to do with any of this.
I could point out engineers doing plenty of evil unproductive and wasteful things too (malware, fart apps, NSA surveillance applications, whatever), but much like your original complaint, it's just character assassination
The decision-makers are mostly comprised of people with a background in law. Why is it fair to pass a law for taxing software development but not taxing the act of practicing law?
I just think it is unfair for legislators to protect their professional occupation at the expense of others. There clearly needs to be more diversity among people who hold public office.
As for unproductive engineers - sure, there are plenty. The same applies to all other professions. However, it is hard to argue against the progress made by STEM fields over the last few centuries.
Proof? This is worthless of a statement as
"[Lawyers] are far less productive than engineers -- all they do is read reddit all day and not create anything of value."
The more productive people are, the more wealth can be generated.
http://www.fas.org/sgp/crs/misc/R42530.pdf
http://www.myvisajobs.com/Reports/2012-H1B-Visa-Category.asp...
http://repealtheitservicetax.com/2013/08/02/plumbing-and-car...
Is it because that number is perceived as low, and mentioning it undermines the argument of how dire opponents think it is?
(Genuinely asking, not trolling; my employer is almost certainly going to be hit by this tax.)
So no, it applies if your client is located in the state.
*except in Louisiana, where they use French terminology for everything and you have immovable/movable property rather than real/personal
I read the law and best I can tell, I don't qualify for this. It seems to be centered around "pre-written" packaged software. I'm writing it right now, so how can it be "pre-written"?
I won't pay this tax until I hear a valid argument that doesn't start with "Well, to be safe...". I'm not paying the state protection money to be safe from vagueness of their laws.
Using a library isn't customizing, according to the FAQ -- as long as the work done to use it is < 10% of the total project. So, if you take 5 months to write an iPhone App, then you need some library, and you download it and add it to your project in 2 days, you are ok. If you were worried, you could line-item it out and charge tax on just that work.
Sounds like a complicated mess.
My experience is that that is no where near 10% of the work. If it is for your specific custom app, you should line-item the work out.
In this case, if you are audited, they said they are looking for a "good-faith" estimate -- your source-code repository and history of checkins are a journal of this that is much better than anyone would ever have. I would recommend keeping the integration somewhat isolated so that it can easily be compared to the whole.
If you are using PhoneGap or some other application framework, then as the law is written, I think the whole thing is taxable. I think there is a good chance that this part may be amended -- if you are in MA, please write the DOR about this case (I already have).
Email rulesandregs@dor.state.ma.us -- just set up the situation and ask the question -- they will use it pretty much verbatim in their FAQ.