GBC’s Fry: GBC to urge repeal of newly-enacted computer services tax

Don Fry Commentary on WYPR

When state lawmakers convene on January 9 for the 2008 regular session of the General Assembly, the Greater Baltimore Committee will ask them to repeal legislation passed during the recent special session that extends Maryland’s sales tax to a wide range of computer services.

The computer services tax caught many by surprise. It was added by the Senate Budget & Taxation Committee during the special session to deficit-reduction and 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 at the end of the special session.

The state’s new 6 percent sales tax will apply to services including computer facilities management and operation, system planning and design, and data processing storage and recovery, to name just a few. The tax will take effect on July 1, 2008 and expire on June 30, 2013 and is projected to raise approximately $214 million in new revenue.

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

Lawmakers are imposing a significant new tax burden and increasing 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. 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.

By almost any measure that relates to our state’s business climate, this tax is not a good idea. It’s not the kind of measure that should be enacted on a whim without a thorough examination. During the upcoming General Assembly, lawmakers should give themselves an opportunity to conduct that examination and reverse this misstep.

For the Regional Business Report, this is Don Fry, President and CEO of the Greater Baltimore Committee, for 88.1 WYPR, your NPR news station.

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