Some local computer businesses say they will move to Virginia or elsewhere if Maryland legislators get cold feet about repealing the so-called “tech tax” before the General Assembly session ends Monday.
“If the company wants to remain viable and employ people, the company would not be able to have any choice but move,” said Linda Kazmarek, president of Columbia, Md.-based Visual Data Systems. “It would be one of those situations where we could not stay in Maryland and remain competitive in the market.”
Virginia state Sen. Kenneth T. Cuccinelli II, Fairfax Republican, last week sent an e-mail across the Potomac inviting computer companies to relocate to what he described as Virginia’s less-hostile business climate.
“I would like to take this opportunity to personally invite you to relocate your business to the commonwealth of Virginia,” Mr. Cuccinelli’s invitation said. “Here in the commonwealth, we believe that business is the lifeblood of the economy and I am personally committed to making sure we remain welcoming to business owners.”
Maryland state Sen. Alex X. Mooney, Frederick Republican, distributed Mr. Cuccinelli’s letter to remind lawmakers of the potential fallout should the tax stay on the books.
The computer-services sales tax was inserted near the end of November’s special session of the General Assembly, which was called to close a budget shortfall estimated then to be about $1.5 billion.
Under the provision, Maryland on July 1 would start imposing its 6 percent sales tax on some computer services, including hardware maintenance and data processing. The tax was projected to raise about $200 million annually.
Tom Loveland, CEO of the Baltimore firm Mind Over Machines and president of the Maryland Computer Services Association, said other businesses, including Kensington-based Hodgson Consulting, were considering moves to Virginia if the state doesn’t repeal the tax.
Will Burns, a spokesperson for the Maryland Chamber of Commerce, said computer companies in the state were “actively recruited” by economic development groups from several states.
“I think you are seeing the tides turn a bit, but there is no question there were businesses considering it,” he said.
The Maryland General Assembly, which enacted the tax during a special session in the fall, has felt a strong backlash and is expected to repeal the tax as early as Monday.
A repeal of the computer services tax passed its toughest hurdle this week after it was approved by the state Senate on a 30-17 vote. In doing so, Democrats defeated Republican efforts to prevent a new surcharge on wealthy Marylanders to help take its place.
The tax still must pass the House, where Speaker Michael E. Busch, Anne Arundel Democrat, has indicated he thinks the bill is a good compromise.
“I really, really hope the state of Maryland understand the mistake they have made and repeals this,” Miss Kazamarek said.
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