The controversial levy, which targets a wide range of computer services, would drive IT companies from the state, critics say.
The Maryland Senate voted April 4 to repeal a controversial 6 percent tax on computer services. If also approved by the Maryland House of Delegates, the vote would reverse a November decision to tax computer and data support services, custom programming, consulting and disaster recovery services.
The Maryland upper House's vote replaces the tax with a new levy on millionaires and a package of tax cuts.
"We understand and appreciate that difficult decisions must be made in order to repeal the computer services sales tax. However, we believe that the compromises offered in this legislation are the best options for ensuring Maryland's technology economy," the Tech Council of Maryland said in an April 4 letter to lawmakers.
Facing budget shortfalls, the Maryland legislature has struggled to balance its budget. But IT leaders fear the new tech tax would make the state less attractive for tech investors and impose an unfair burden on local companies.
As originally approved, the Maryland legislature raised the state sales tax by 1 percent and added computer services to the list of taxable entities.
"The irony here, of course, is that Maryland prides itself on being a tech leader," Roger Cochetti, CompTIA's group director of U.S. public policy, said in a statement. "Yet, as a statement of political will, the tax seems to say, 'IT isn't such a big thing.' Counterintuitive in the extreme, the wealth of Maryland lies not just in its abundant resources, but in its immense productivity and innovative spirit, which gets amped by IT."
Cochetti said that a lot of small businesses operate on thin margins and the new tax would lead to less investment in IT services in the state.
"Maryland's economy, driven by small businesses and oiled by IT, can't afford this," he said. "The 6 percent tech toll will likely cause companies struggling in these turbulent economic times to either move out of Maryland or further retrench, avoiding innovative IT solutions that would help them weather the storm."