Maryland To Tax Custom Programming and Computer Services

mcwop writes "Early this morning Maryland passed legislation to apply a new 6% sales tax to 'custom computer programming' and other computer- and hardware-related services. Computer industry groups lobbied hard against the measure to no avail. Purchasers of IT services may find that in-house IT and buying out-of-state become attractive options, as well as cutting money out of other projects."

buying out of state isn't an option

[Anonymous Coward]

since companies have to pay a use tax for those cases

Re:So...

[Stamen]

You payed "sales tax" on labor? Serious question, and perhaps that's how it works in your state. But in my state (CA), if you only provide services, without selling any product, you don't even have to get a seller's permit, as there is no taxes on services. I know because my company only provides services and no products.

Re:So...

[merreborn]

And why should we be suprised by this?. The last time I took my car in for repair, I paid sales tax on part and labor. When I have my car parked Valet, taxes are factored into the the cost. And when UPS delivers a package for me, I pay tax on that too.

In California, repair and installation labor is non-taxable [ca.gov].

Point being, some labor is untaxed in some parts of the country, so this development may come as a surprise to some of us.

Re:Or just don't pay...

[moderatorrater]

I obviously didn't mod you, but I would guess it's because you are advocating that people do something which is illegal and illogical, since not paying taxes would be a very bad thing overall since I enjoy our social contract, corrupt as it is. You're also insulting to the government of Maryland, offensive in general and insulting of those who don't support your position. Insulting and offensive while lacking useful content isn't technically trolling, but it should be modded down and there's no option that fits, so the mod could have chosen troll because it fit the closest. Personally, I wouldn't have modded you down, but I don't think it's inappropriate.

Re:buying out of state isn't an option

[nurb432]

But moving out of state is an option.

Re:Get real! Why should one business be favored ..

[cgenman]

In other words, It will now have to pay its fair share of taxes, same as other businesses.

Except other labor-only services pay no such tax. Specifically, any maintenence services (as opposed to fabrication of new items) are not taxed. From the Maryland tax code web page:

On the other hand, charges for repairing or restoring an existing item of tangible personal property to its original condition are not subject to tax. A charge for reconfiguring or enhancing existing tangible personal property, unless it results in the creation of a new and different item of tangible personal property, is also not taxable.

Essentially, IT is being singled out for paying taxes whereas other labor types do not. There is no tax on having your accounting done, but now there is a tax on having your accounting software debugged. There isn't a tax on having your car fixed, but there is a tax on having your servers fixed. There is no tax on having your nails done, or having your lawn mowed, or having your house painted. Why are technology services being singled out in this respect?

Re:Its not that far of a drive to Deleware

[King Louie]

Actually, it already has. the area around Reston / Herndon Virginia (perhaps 20 miles from Maryland) is a huge IT hub. It's the Silicon Valley of the East coast. Why so many high-tech companies? Because Virginia doesn't see a corporation as a cash cow to be milked to death (at least, not yet).

Re:So is this good or bad for coders?

[Mr. Slippery]

I'm no longer a Maryland resident, but I'd probably have to file a non-resident income tax form at the end of the year just to pay this tax.

Nope. Completely different tax, completely different forms [marylandtaxes.com].

Re:So...

[oddaddresstrap]

I don't know about California, but in Washington (State), there's no sales tax on non-tangible services. However, the provider has to pay the Business and Occupation tax which, although it's usually less than the sales tax, is usually a few percent. And if you're starting a new business and don't check out the end of quarter tax forms, it can be a surprise that the state is going to take 2.5% of your gross income. It's a sales tax that is hidden from the purchaser. It would be better if the state was honest and just collected it straight up.

Re:IOW

[penix1]

There's a recursive joke in there somewhere...