Debate Expected on Sales Tax Expansion Plan

Maryland lawmakers today are considering expanding the state sales tax to additional services not currently taxed.

The Senate will vote on legislation that would apply the tax to landscaping, arcades and computer services. But the House appears unwilling to levy the tax on the computer services industry, a key House committee chair said this morning.

"Broadening the sales tax, I'm sure you're going to see different services," said Del. Shelia E. Hixson (D-Montgomery), chair of the Ways and Means Committee, whose members today will debate increasing the income and sales taxes.

"Our problem with the computer services is that the only state in the United States that's done it is Connecticut, and there are about 40 lawsuits on it," Hixson said. "That seems like a non-starter for us."

She added that Pennsylvania also had a tax on computer services, but "had to repeal it."

Gov. Martin O'Malley (D) had proposed extending the sales tax to a handful of services, including health clubs and tanning salons. But a Senate committee on Tuesday nixed that proposal and instead honed in on landscaping, video-game arcades and computer services -- services that would yield about $250 million a year in new revenue, according to legislative analysts.

Business owners in all three of those industries said yesterday that they were caught off guard by the Senate's proposed amendments and said they would oppose the measure.

Robert Kaitz, owner of My PC Guy, Inc., based in Anne Arundel County, said he thinks taxing his industry is "crazy." Taxing his firm's computer services would squeeze the state's small businesses, he said.

"It puts our prices sometimes out of reach of small businesses," Kaitz said. "The money doesn't come out of my pocket. It's coming out of my clients."

Steven P. Cissel, president of the Maryland Nursery and Landscape Association and the owner of a Howard County turf farm, said taxing landscaping services could force some people to cut back on the upkeep of their gardens, which could harm the environment.

"What they're doing is about to bite the hand that feeds their environmental issues," Cissel said of lawmakers. "A healthy landscape consumes carbon dioxide," Cissel said.

Vanessa Finney, the association's executive director, said the tax could divert business to so-called underground landscapers who are not licensed and avoid paying taxes.

"When taxes are approved, it can drive more consumers to use the underground folks," Finney said. "That underground industry is able to undercut the legitimate businesses."

Meanwhile, operators of arcade games said it would be difficult to levy a sales tax on their coin-operated machines.
"You can't put two pennies for tax into a machine," said Granville Trimper, who runs a large video-game arcade pavilion at his amusement park on Ocean City's boardwalk. "It would be a real mess."

Unlike the fitness buffs who voiced strong opposition last week during rallies and testimony, these three industries do not have an active presence in Annapolis.

"There's no strong voice," said Barbara Hoffman, a lobbyist and former state senator, said of landscaping, computer services and arcade owners. "I think that's one of the reasons they got picked, I've got to tell you ..... But I'm sure they'll come out of the woodwork."

-- Philip Rucker

By  |  November 7, 2007; 6:17 PM ET  | Category:  General Assembly
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