The Maryland Senate is expected to take action today, during an 11 a.m. session, on an amended version of SB 2, the Tax Reform Act of 2007. For a complete overview of the legislation, click here.

The Senate Budget & Taxation Committee made a number of positive changes to the Governor’s tax plan. The committee removed the proposal to impose mandatory unitary combined reporting. It also moderated the individual income tax increase, replacing the 6 percent and 6.5 percent brackets with 5 percent and 5.5 percent brackets.

The Budget and Taxation Committee scrapped the sales tax expansion to real property management services and tanning, massage, physical fitness, sauna, or steam bath facilities or services that would have generated an estimated $60 million. They replaced those services with computer services, landscaping and arcades, which will generate and estimated $300 million, paid largely by Maryland businesses. The Maryland Chamber opposes this measure because:

• Computer service and landscaping companies had no opportunity to oppose this expansion during public hearings. These services were not a part of any bill heard during the special session. Companies providing these services deserve the opportunity to voice their opposition.
• Maryland businesses will pay the majority of this $300 million sales tax expansion. Maryland businesses will face more than $800 million in new taxes from this tax package.
• This proposal places Maryland businesses at a competitive disadvantage with service providers in other states. Many of the technology services covered in the bill, like custom programming and system planning and design, can be performed by companies outside the state who would not be subject to this tax on their services.
• Maryland is a small business state. More than 50 percent of private sector jobs are created by small companies. Expanding the sales tax to professional services hurts these small and growing companies the most. Large companies hire employees to perform many of the services outlined in the bill. Small businesses are more likely to hire outside companies to perform these services, and therefore would be more likely to pay the proposed sales tax.
• There is a reason most states don’t attempt to impose a sales tax on services. It is almost impossible to administer. Consider the nightmare of trying to identify where the taxable transaction took place.

Take Action

• Call Your Senator Today: Oppose Sales Tax Expansion to Computer and Landscaping Services
• Email Your Legislators: Oppose Sales Tax Expansion to Computer and Landscaping Services