Recently Massachusetts lawmakers in the House voted to repeal the technology tax on computer and software services. This time is was outvoted, but smart CFO’s will be prepared for similar legislation changes in the future.

Currently, Connecticut, Hawaii, Mississippi, Nebraska, South Carolina, South Dakota, Tennessee, West Virginia, and Wyoming all require the tax. Massachusetts is the latest and possibly the most complicated of them all. It is also the highest in the nation at a rate of 6.25%. Connecticut is the lowest at just 1%.

Unfortunately, like most laws, the parameters are somewhat difficult to decipher. CFOs must determine which of the services are taxable and which are not. For example, a company that sells in another state without the tax laws will not have to pay the taxes as long as the work is performed in that other state. Moreover, customers with multiple locations may end up having to pay the taxes themselves, rather than through their service providers.

Taxrates.com asks a very good question in their article on this topic, "How does your business keep track of ever changing sales tax rates, rules and regulations?"  

In order to stay ahead of the game, CFOs should run a state-by-state analysis of sales tax laws and determine how those laws apply to their services. They need to have a clear idea of what services they offer and where the work they do is actually performed. Once they have an idea of where their company has sales tax obligations, they can turn to sales tax automation software, like Avalara’s AvaTax, to keep track of the changing rates, rules and boundaries, and to minimize risk of a negative audit.

Avalara, with a good ERP system like Microsoft Dynamics GP can help them with this and also help them track sales tax on all of their products and services. Microsoft Dynamics GP with Avalara is the right system for the job.

If you are a Connecticut or Massachusetts company that wants to stay on top of sales tax rates, rules and regulations with Microsoft Dynamics GP contact CAL Business Solutions at sales@calszone.com or 860-485-0910.

Source: What CFOs Need to Know About Sales Tax on Software Services

By Anya Ciecierski, CAL Business Solutions, Connecticut & Massachusetts Microsoft Dynamics GP Partner