In case you haven’t heard. Massachusetts has recently enacted the worst possible legislation I can think of for the local entrepreneurial community: a 6.25% tax on all intra-state revenue for software services. You heard that right, if you have an online business that traffics in data and has an office in Massachusetts, starting July 31st, 2013 you have to pay 6.25% on all revenue in the state. That comes right off the top line. Yikes! Your competitor in Silicon Valley can make the same product, sell to the same customer, and pay 0%.
The first time I read about this, I assumed that it was nonsense that wouldn’t affect me. Not true. At Testive we have already spent several hundred dollars talking to our attorney about this. It is real.
The impact on our business is enormous. It no longer makes sense for us to conduct business with any customers in Massacusetts because the 6.25% tax is too big of a cut on our profit margin. We can’t easily increase prices for one customer over another because we’re an online company and we don’t discriminate based on customer location. We probably will continue to take Massacusetts customers just to make things simple, but we may lose money on them, and we’ll likely stop advertising inside the state.
Is this the death blow for the Boston entrepreneurial ecosystem? Why would anyone in their right mind open a software services company in a state where their profit will be reduced by 6.25%, right off the bat? It doesn’t make any sense. I can’t in good conscience advise anyone to start new business here until this law is changed.
At a time when Boston is bleeding good entrepreneurs to Silicon Valley, the last thing we need is an entrepreneurship tax. The short-term revenue gained from this moronic tax will be crushed by the long-term affects of loss of commerce.
Hello! Online businesses can be built anywhere, you can’t tax them at the local level. That’s crazy.
Take action:
Look up your representative in the state legislature here and send them an email telling them how much of a disaster this is for the entrepreneurial eco system.
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