GBC urges repeal of newly-enacted computer services tax

The Greater Baltimore Committee will urge state lawmakers during the 2008 regular session of the General Assembly to repeal legislation passed during the recent special session that extends Maryland’s sales tax to a wide range of computer services, GBC president and CEO Donald C. Fry announced Dec. 11.

The computer services tax was added by the Senate late in the special session to deficit-reduction tax reform legislation. The tax was subsequently eliminated from the legislation by the House, but was added back into the bill during conference committee deliberations.

“In effect, we’re asking state lawmakers to take a closer look at the impact of this tax that didn’t enjoy a thorough and deliberative debate before it was passed,” said Fry. “I believe that, upon reflection, they will recognize that this tax could damage Maryland’s business climate and erode our state’s perception in business sectors beyond our borders.”

The new 6 percent sales tax on computer services, which includes computer facilities management and operation, system planning and design, and data processing storage and recovery, will take effect on July 1, 2008 and expire on June 30, 2013. It will raise approximately $214 million in new revenue to the state in FY 2009, according to fiscal analysts.

“This imposes a significant new tax burden and increases operating expenses for virtually every business in the technology sector – a sector that Maryland and most other states are working hard to attract and accommodate,” said Fry. “And beyond the technology sector, there is hardly a business that doesn’t require some type of outsourced computer service or management.”

The tax also puts computer services businesses located within Maryland at a disadvantage with their competitors in most other states in the U.S. – only nine of which tax computer services, said Fry.

Anticipating that lawmakers will ask him and other tax opponents for suggestions on how to make up the $200 million in unrealized revenue if the tax is repealed, Fry said the GBC will work to develop proposals for either reducing state spending or raising other revenues to the state’s General Fund.

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