As much as I find these taxes ridiculous (and also hard to predict for a business owner), Couldn't they just add 3.62% to their billed costs to cover those expenses? On a $100k software gig, this would be just $3620 or so. Round it to $105k and they should be pulling in the same amount. On $10k it's just $362. So that would maybe shift a $10k project bid to $10.5k to cover those taxes and still bring in the same net to the company. Would that really make them uncompetitive? "Cost of business" and all that?
Hi folks, this is Matt from 303 Software, the dev shop in the article. Rexreed, you're right. Thing is, I don't even mind paying the tax going forward. We'll just add the 3.62% to our invoices. What I object to is having to pay back taxes, penalties, and interest on this obscure tax while the City gives tax breaks to out of state companies.
I don't think the issue lies so much in tacking on a bit extra to cover the tax as much as being subject to it without knowing. It doesn't seem unreasonable to expect that building an application for another company would be considered a service. They may have done the research and discovered that service providers aren't required to collect sales tax and moved on. The tax code is such that you can't expect to understand every little component of it unless it is your full-time job.
Why are these taxes ridiculous, unless you don't support the idea of taxation at all? Lots of economic activity gets taxed, and fundamentally, if we want to have nice things (roads, utilities, public education, police, court system, etc) someone has to pay for them. It's more than reasonable to want businesses -- which use many of the above, and crucially rely on eg good public schools to get parents to live and work near the business -- to chip in.
That said, saying a 3.6% tax makes a software business uneconomical is pretty silly. If that makes the difference between profitability and unprofitability either the business was mostly investing profits internally into growth or was nearly uneconomical anyway. It mostly sounds to me like bitching that the owners may have to settle for Hawaii instead of St Barts this year.
For me, it's not that these taxes, in particular, are ridiculous, but that the tax code is so freaking complicated, that I sometimes need a CPA to double-check my records (AMT, odd-ball deductions, etc). And this is for my personal income taxes - it's even worse for business owners.
You don't have to be against taxation in general to think a specific tax is ridiculous.
Ok, a 3.6% tax is fine, I agree. How about five 3.6% taxes? Oh, now it's just being ridiculous right? Except that's exactly what the tax creep ends up being when you have politicians drunk on spending just to spend.
The US tax code is a perfect example of how this works.
