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Mass. Senate joins House to repeal new ‘tech tax’

The Massachusetts Legislature, bowing to a chorus of opposition from the state’s technology sector, has overwhelmingly voted to repeal a new technology tax that has been in place less than two months.

The Senate yesterday voted 38-0 to undo the tax, which applied the state’s 6.25 percent sales tax to computer and software services. The vote came a day after the House backed the repeal by a 156-1 vote. The repeal is retroactive to when the tax first took effect.

Gov. Deval Patrick has said he’s open to repealing the tax, which was part of a larger transportation financing measure, but would wait to see what ideas House and Senate leaders have to make up for the lost revenue. Officials estimated the tax would generate $161 million in its first year.

Asked after the House vote Wednesday whether he would veto the repeal if it didn’t include additional revenues, Patrick said: “That’s not where I am . . . We’ve done what we can do and the Legislature has done what they believe they can do for right now. But the fact is we’re going to have to come back to this.”

Senate Ways and Means Committee Chairman Stephen Brewer, a Democrat, said during yesterday’s debate that he expects greater than anticipated revenue growth will close the budget hole. The current fiscal year ends June 30, 2014.

Patrick has said that while the state has been running a surplus, it’s still early in the fiscal year and there are no guarantees that trend will continue. Asked for a comment yesterday, the governor’s office referred to Patrick’s Wednesday response.

Senate President Therese Murray said she was proud the Senate decided to undo the tax.

“Through ongoing conversations with industry experts, it became clear that this sales tax was having an unanticipated negative effect on our technology industry,” Murray, a Democrat, said in a statement.

Republicans, who had pressed for the repeal, hailed the about-face by Democrats.

“Today is corrections day,” said Senate GOP Leader Bruce Tarr. “We can correct this mistake of trying to impose a tax on our innovation economy, trying to impose a tax on one of our most promising sectors as we try to recover from a recession.”

The tax was widely criticized by technology companies, which said it could stifle the growth of the innovation sector and cost jobs in Massachusetts.

House Speaker Robert DeLeo has said that the repeal vote shows that lawmakers listened to business leaders about the burden the tax would put on the industry. He said also that no new taxes would be raised to make up for the lost revenue.

“Our strong commitment to business and the innovation economy led to its repeal,” he said in a statement Wednesday.

During yesterday’s debate, senators shot down other proposed changes to the state’s tax code. They rejected both an attempt to raise the gas tax by 5 cents and a second amendment that would have eliminated part of Massachusetts’s new transportation finance law that automatically links future hikes in the gas tax to increases in the rate of inflation.

The same transportation finance bill that included the technology tax also included a 3 cent-per-gallon hike in the gas tax and a $1 per pack increase in the cigarette tax.

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