Maryland To Tax Computer Support Services

Maryland legislators have approved a new tax on computer services.

The state's decision to add computer services to the state's new 6% tax rate, which takes effect in January, has raised the ire of computing industry representatives.

The measure increases sales tax by 1% and adds computer support services, data center support, custom programming, consulting, and disaster recovery services to the list. Legislators approved the change as part of a tax package they passed early Monday morning.

The Computing Technology Industry Association said the move "will bring cascading harm" to the state's IT industry, small local businesses, workers, and consumers.

"CompTIA fought hard to see that the budget would not be balanced on the backs of computer services," Roger Cochetti, group director of U.S. public policy for CompTIA, said in a statement.

"The IT industry is directly or indirectly responsible for most of the productivity gains that the U.S. and the state of Maryland have enjoyed over the last two decades, helping to maintain the competitiveness of Maryland's businesses both nationally and internationally. But for reasons that we cannot comprehend, some lawmakers thought otherwise, deciding to single out computer services for whopping new taxes, instead of those proposed for tanning salons and landscaping providers, among others."

Cochetti said the tax, imposed to make up for budget shortfalls, means Maryland will become less attractive to IT companies and local businesses which depend on IT.

"Just at the time that most cities, states, provinces, and countries around the world are encouraging the computer industry to locate there, the Maryland Assembly and Governor chose to discourage the computer industry from locating and providing services in the 'Free State," he said.

Cochetti said the tax could encourage Maryland IT users to outsource computer services. He criticized legislators for making the decision without hearings or consultation with IT industry representatives. He called the move one of the "least informed and most harmful actions ever undertaken by the Maryland State government."

Information was not immediately available on how many states tax computing services, but insiders said the practice is the exception, not the rule.