In the hubbub about the dueling budgets proposed by Massachusetts Governor Deval Patrick and the state legislature, one proposal that has gone relatively unnoticed has the potential to open a Pandora’s box of new taxes. Aligning with the Governor, the House and Senate are ready to impose a sales tax on a segment of the service industry. Their particular target for the sales tax is customized computer software.

While targeting customized computer software seems like a narrow focus, the definition of the category is very broad and includes such everyday services as website development. If passed, businesses would be required to pay an additional 6.25% for a new website, or for hosting services for a current website. This is a tax that will impact virtually every business in the state.

For the most part, the state taxing authorities have remained hands off when it comes to sales tax for services. The only service sector currently forced to collect sales tax is telecommunications, which is why your monthly phone and cellular bill includes all those fees and taxes tacked on at the end.

It is estimated that $161 million per year in new revenues would be generated by this sales tax. The money would be earmarked for funding of state transportation projects and the MBTA.

For additional information and updates on this and other state and federal tax issues, contact the Gray, Gray & Gray Tax Department at (718) 407-0300. Or visit http://www.gggcpas.com.