Washington state to impose 10% sales tax on all custom software

[Peter Gibbons]

http://www.techflash.com/seattle/2010/03/wash_tax_plan_shakes_small_software_makers_skips_microsoft.html

I am getting sick of this.

Here in Ontario my consulting services will be taxed another 8% starting 1st of July.
( In addition to the current 5% tax. )

At the current rates in the area this will make contractors and consultants from $5/hour to $10/hour more expensive to the clients.

Coincidentally my contract will end on the 30th of June 


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Meanwhile, smaller companies are grappling with the implications of the proposed custom-software tax, saying it would reduce the incentive for their clients to hire them.
The proposed custom-software tax is not included in the state Senate's version of the legislation. However, under the version of the legislation passed last weekend by the House, companies in Washington that hire firms to work on custom software would be required to pay state and local sales tax on those services.
"It means that a 5 person team of entrepreneurs building a cool custom software suite, or a group of system integrators, would face a 10% tax on their services while keeping the exact same project in-house would not be taxed," wrote Rep. Reuven Carlyle, a Democrat from Seattle, in a blog post this week. "It would be a massive blow to the entrepreneurial community in our state."

[dinotech]

From what I've read it's not in stone, yet.  What about requesting a w2 instead of a 1099?  The article did state that some firms may decide to become employees of a larger firm to avoid the tax.

I'm sure there are ways to reduce that tax burden - it depends on how it is written and what they will enforce.

D