- The Washington Times - Tuesday, July 26, 2011

ANNAPOLIS — Maryland legislators said Tuesday they are unlikely to increase taxes during a special redistricting session in October, but could eventually consider cracking down on tax-free Internet sales or broadening the state’s sales tax to generate more revenue.

The options were discussed during a meeting of the Senate Budget and Taxation Committee, called to discuss potential approaches. Committee Chairman Sen. Edward J. Kasemeyer said both ideas have been discussed in legislative sessions but legislators are not considering either option anytime soon.

“We’re just getting the committee up to speed … if these proposals do come forward,” said Mr. Kasemeyer, Baltimore County Democrat. “I don’t have any expectation that they are going to at all.”

While Maryland collects a 6 percent sales-and-use tax on most goods, it does not impose the tax on most service industries. Legislators imposed the tax on several industries — including commercial building cleaners, credit reporting services and some telecommunications providers. And some current legislators have hinted that expansion of the tax could help generate revenue and close the states current $1 billion structural deficit.

State legislative analysts say expanding service taxes on just the engineering industry could bring in as much $211 million in annual revenue. Business leaders have bristled at the idea, arguing that it could overburden small businesses and drive many larger businesses out of state.

The Democrat-controlled General Assembly notably voted in 2007 to expand the sales tax to the computer services industry, only to repeal it the next year.

Another revenue option that has been discussed is stronger enforcement of the state’s Internet sales tax.

While Maryland residents are required to pay state sales tax on all items — even those purchased from online vendors outside the state — some companies choose not to enforce the tax on the states behalf and the state has limited authority in demanding that they do so.

While most online sellers charge, collect and forward tax revenue to the state, Maryland officials say some — most notably Amazon.com and Overstock.com — choose not to charge or collect state tax because they do not have a physical presence in the state.

Legislative analysts cited a study by the University of Tennessee that said Maryland stands to lose $184 million annually from uncollected sales tax on remote purchases.

Sen. Richard Madaleno Jr., Montgomery Democrat, said online avoidance of sales tax has put local business owners at a competitive disadvantage.

“Other sectors of our industries are going to be decimated until we act,” he said.

Maryland Chamber of Commerce officials warned that attempts by other states to pass legislation forcing businesses or their in-state affiliates to collect sales tax has led to lawsuits and even prompted some businesses to move out of the state.

State officials said other approaches could include asking buyers and sellers to voluntarily pay sales tax or offering temporary exemptions to companies if they build facilities in the state.