Whitney Blake, The Examiner
2007-12-03

BALTIMORE - The Maryland technology community has been up in arms ever since Gov. Martin O’Malley signed a tax package with a new 6 percent sales tax on computer services. Services that will be taxed include support services, computer programming, consulting services for computer systems design and disaster recovery.

“I’m being asked to levy a hefty tax on my clients, and the thing that really aggravates me is that Virginia computer companies won’t impose this on their Maryland clients,” said Matthew Shapiro, president of Rockville-based networking and integration firm Design One Corp. Shapiro doesn’t want to physically move, but he does want to consult with a lawyer about setting up a subsidiary outside the state.

The tax caught many in the technology industry off guard. Tech Council of Maryland Chief Executive Officer Julie Coons said she was “shocked” the tax actually passed, because at one point she was “assured it would not move forward.”

Some say the tax package is a fiscal necessity. “Broadening the sales tax was something Maryland really had to look at,” said Richard Clinch, director of economic research at the University of Baltimore’s Jacob France Institute.

Others disagree.

The tax will be a “small-business tax,” as many smaller companies outsource their computer network maintenance work, said Maryland Chamber of Commerce spokesman Will Burns. “Many computer service providers are small, fragile financially and in competitive markets,” said Anirban Basu, chairman and chief executive officer of the Baltimore-based Sage Policy Group Inc.

The state is expected to net about $200 million from the tax, according to Christine Hansen, a spokeswoman in the governor’s office. Maryland Comptroller Peter Franchot, who will enforce the tax, is against it, and he pointed out that Pennsylvania and Florida repealed similar taxes in a letter to House Speaker Michael Busch.

The Associated Press contributed to this article.

wblake@dcexaminer.com