Maryland to Tax Computer Services

Maryland lawmakers Nov. 19 approved a 6 percent sales tax on computer services, a move industry groups call harmful to business and service.

The measure, among $1.3 billion in new taxes intended to close a $1.7 billion budget deficit next year, levies a 6 percent sales tax, beginning in 2009, on IT facilities management and operation; custom computer programming; systems integrators; systems consultants; computer disaster recovery services; and hardware or software installation, maintenance and repair. Internet access, computer training, telecommunications, banking services and business management will be exempt. It also affects arcades and landscaping services.

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The measure passed 24-20 in the Maryland state Senate and 78-56 in the House.

The tax hike will hurt business and service, said Robert Kaitz, CEO of My PC Guy, a professional IT support provider in Glen Burnie, Md.

"That increase gets passed down to our clients," Kaitz said. "Some customers cant afford the prices, so theyll go to a cheaper guy who may not be as professional."

Maryland Gov. Martin OMalley and legislators expect the tax to raise $300 million annually, but opponents argue it may drive businesses to other states.

"This tax will certainly encourage Maryland IT users to outsource their computer service needs to companies located in Reston, Va., or even Bangalore, India," Kaitz said, adding that he is considering relocating. "I told my employees, if this passes, Im moving to either Delaware or Florida."

The Computing Technology Industry Association (CompTIA), an industry group, said the tax will bring "cascading harm to the states IT industry, local small businesses, their workers and IT consumers."

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