Emerging Business and Technology Group

of Levine, Katz, Nannis + Solomon, P.C.

SPRING 2006 NEWSLETTER

~ NEWS FLASH ~

Massachusetts taxes prewritten computer software differently

Beginning April 1, 2006, Massachusetts software companies selling their software, whether or not delivered over the internet or not, are now required to charge sales tax to their Massachusetts customer. The change came about when the legislature redefined what a “transfer” of software is. No longer must software be delivered in a tangible form (i.e. CD). Instead, after April 1, 2006 if delivered electronically, telephonically, etc., the software will be considered a transfer of personal property. The law still does not apply to custom software applications that are not considered “earned”.

The new law also applies to Companies that have servers located outside of the state that are used by Massachusetts companies. In addition, if the software includes upgrade rights, or maintenance contracts, one would have to tax these services as well.

Please contact our emerging technology group, or Jeffrey D. Solomon, CPA, CVA in our office at 781-453-8700 if you have any other particular questions about how to handle your software sales issues.

FAS123R Becomes a Reality-Get Ready It’s Here…..

There are many issues to evaluate if you are contemplating the issuance of stock compensation to your employees in 2006, but one option no longer available to public or nonpublic companies is the complete avoidance of compensation expense. FAS 123(R), “Accounting for Share Based Compensation,” is effective for non-publicly held companies for fiscal years beginning after December 15, 2005.

For complete story, click on link below:

http://www.lknscpa.com/Stock-Options.html

Deferred Comp Rules are Broad and May Affect You

A new set of tax rules were established when The American Jobs Creation Act of 2004 was passed that dictates how non-qualified deferred compensation plans are to be treated going forward. In summary, a deferred compensation plan now requires the employee to include the amounts in income unless there is substantial risk of forfeiture. The rules apply to amounts deferred after December 31, 2004. A substantial risk of forfeiture occurs when the employee must perform substantial future services or when a specified future condition exists. Be careful going forward. A non-qualified stock option plan may be deferred compensation if the purchase price is less than its fair market value on the date of agreement. In addition, a phantom stock plan may also be considered a deferred compensation plan. Please call our office at 781-453-8700 if you have a plan that could qualify as a deferred compensation plan and you want us to do a quick review of it.