Mar 21, 2008 5:30 pm US/Eastern
Tech Tax In Repeal Process, Substitute Unclear
ANNAPOLIS, Md. (AP) ―
While a tax on computer services in Maryland is locked in the crosshairs of repeal, lawmakers are still trying to decide how they could pull the trigger.
Although there are a variety of proposals for repeal and exemptions, Sen. Ulysses Currie said there doesn't appear to be any agreement yet on how to replace the estimated $200 million that the tax would create if it goes into effect in July.
"There's a sense that we will repeal, but it is still, 'Where do we backfill the $200 million?' I think that's more the issue than the repeal," said Currie, who chairs the Senate Budget and Taxation Committee.
So far, Senate President Thomas V. Mike Miller said leading alternatives appear to be a tax on high-income earners that would expire after a couple of years.
Another alternative would be to use some of the $400 million the General Assembly approved for transportation during November's special session.
For much of the session, legislative leaders have said finding a substitute would be extremely difficult.
As the days wear on, though, the repeal has gained increasing credibility.
Asked if the tax appears to be on the way out, Miller replied: "I think that's correct."
Currie said the task of finding a replacement is "very much up in the air," with three or four alternatives under serious consideration. "I don't think there's a front-runner," Currie said.
Comptroller Peter Franchot, who opposed the tax from the start, said he doesn't know how his office could enforce a tax affecting businesses outside the state.
He points out that other states have repealed computer service taxes that initially were as broad as the Maryland statute.
"It's by definition unenforceable," Franchot said.
The tech tax is an extension of Maryland's sales tax to computer services.
The sales tax was raised from 5 percent to 6 percent during the special session. The computer services tax is set to expire after five years.
Under the regulations, the tax would apply to computer facilities management and operations, custom computer programming, and computer system planning and designing that integrate computer hardware, software and communication technologies.
It also would apply to computer disaster recovery, data processing, data storage, hardware and software installation, software maintenance and repair and Web services.
It would not include Internet access, typing or data entry on word processing equipment or computer training.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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