Service Tax Battle Heats Up
All the businesses in Maryland are trying to see through a “cloud of uncertainty” as they consider current and future economic conditions. The wave of actions coming out of DC concerning policy decisions, layoffs from federal agencies and the withholding of federal funding is having a direct impact on thousands of Maryland businesses and on the State’s budget.
This cloud of uncertainty gets even more dense as the General Assembly is looking to plug the three-billion-dollar shortfall in the State’s $67 billion budget. Many spending cuts and tax increase proposals are on the table. The most troubling one, at this time, is the Business Service Tax.
Click HERE for a copy of HB 1554
Click HERE for a copy of SB 1045
You may ask, what is the short version of all this?
Business Service Tax – Places a 2.5% tax on many of the essential services that a business needs to operate their business. This will increase the cost of doing business and the business providing the service would have to collect the tax and file reports with the State.
The Department of Legislative Services estimated the tax would generate $944 million in new revenue. As written, technology and consulting services would pay approximately $625 million or 66% of the total. There is discussion about lowering the proposed tax rate and applying it to more business services.
Last Wednesday, there was a hearing on HB 1554/SB 1045 and over 400 businesses signed up to testify against the House version of the bill at a House Ways and Means Committee hearing. The businesses, ranging from small companies such as Chick & Ruth’s Delly in Annapolis and Phillips Seafood, to Under Armour and Northrop Grumman.
Maryland Chamber of Commerce President and CEO Mary D. Kane said the service tax proposal has united the business community. “The overwhelming opposition from the business community isn’t about avoiding responsibility — it’s about preventing a policy that will do more harm than good,” Kane said in a statement. “A strong economy is the foundation for sustainable funding, and we remain committed to working on solutions that address the budget deficit without driving businesses, jobs, and investment out of Maryland.”
As the Resolution from the Board indicates, it is a challenge to balance the budget, but it is shortsighted and unfair to balance the budget on the backs of small businesses. We understand the difficult choices that the General Assembly has to make but they must seek solutions that offer a more balanced approach and do not target Maryland businesses, particularly small businesses.