Legislative leaders joined Governor Deval Patrick in backing a repeal of the controversial software services tax, delivering a major victory to the technology and business communities that lobbied hard against it.
House Speaker Robert A. DeLeo and Senate President Therese Murray called for the repeal of the tax on Thursday, just two days after Patrick publicly denounced it. The backing of all three major players on Beacon Hill all but ensures a quick end to the tax. It could be put to a vote in the first formal legislative sessions this fall.
DeLeo said lawmakers would not seek another tax to replace the $160 million that the software tax was intended to raise.
“We’re going to repeal it and move on, and make sure that we send a message to those folks out there that we hear you loudly and clearly,” DeLeo said. “We heard your concerns, and we want to make sure that Massachusetts is still looked at as the innovation capital of the world.”
The software services tax was passed in July as part of a transportation finance package to raise money to mend the state’s aging infrastructure. It extended the 6.25 percent sales tax to a wide range of computing services such as modifying off-the-shelf software or building Web pages.
While many lawmakers had called for abolishing the tax in recent weeks, DeLeo and Murray were among the remaining holdouts. They announced their reversal after meeting Thursday for 30 minutes in the speaker’s office with Paul Guzzi of the Greater Boston Chamber of Commerce, Daniel O’Connell of the Massachusetts Competitive Partnership, and John Regan of the Associated Industries of Massachusetts.
“The business and tech communities of Massachusetts are our top priority,” said Murray.
A turning point for DeLeo, Murray, and Patrick came last Wednesday when they met with a small group of software executive and members of the business community in a two-hour meeting in the governor’s office.
“There was a lot of active listening,” said Debi Kleiman, president of MITX, an Internet business and marketing group, as members of the technology sector explained many of the nuances in the regulations, and just how difficult it would be for Web companies and software firms to comply with it.
In some cases, “one line of code could be taxable, and one line of code wasn’t taxable,” Kleiman said. “It was a law that was put into effect by people who didn’t understand the tech industry.”
Still, said Kleiman, she didn’t leave that meeting convinced the tech leaders had fully achieved their goal of persuading lawmakers to repeal the tax.
At the time, legislative leaders were still trying to figure out a replacement for the revenue the software services tax was intended to collect, said Jeff Bussgang, a general partner of Boston venture capital firm Flybridge Capital Partners, who was also in attendance.
“The central questions that we really got to in this meeting were, is this good economic policy, and, is this a law that could even be practically implemented?” Bussgang said. “The answer to both was a resounding no.”
Then last Friday some of the participants in that meeting heard rumblings on Friday that Patrick was changing his position and would publicly push for its repeal.
Software executive Andy Singleton was in his Needham office when his phone rang: it was the governor.
“He called to say he was against the tax and was going to ask for a repeal and a replacement,” said Singleton. “He talked about the reputational problem and the practical problems with applying and enforcement of the tax.”