This morning, the big scoop of the day goes to TechFlash, who reports on a proposed Washington state sales tax on small software developers:

A proposed sales tax on "custom software" is raising objections from software firms and consultants that work on web sites, business applications, and other specialized programs. They say the tax would make it tougher to land business and recover from the recession.

The provision could affect more than 2,500 firms that have traditionally been considered service providers, not developers of products subject to sales tax.

Weirdly, lawmakers (including former Microsoft employee and now state representative Ross Hunter) aren't targeting the elephant in the room when it comes to Washington state software design. In fact, they could be making it easier for Microsoft to not pay taxes to Washington:

Microsoft's programs, such as Windows and Office, are already subject to sales tax, so the company is not directly embroiled in the custom-software debate. But critics of Microsoft's licensing practices say a separate provision of the financial overhaul — changing the way the state taxes royalty income on software licenses and other intangible goods — would all but eliminate a $100 million yearly tax obligation that they believe Microsoft is wrongfully avoiding by routing large chunks of business through an office in Nevada.

Go and read the whole story, please.