The following information was shared by the Howard County Chamber of Commerce via email today:
- Discrimination against small and fledgling businesses. Small firms typically need to rely on outside services (legal, accounting, etc.) while larger companies can usually rely on in-house expertise that can provide these newly taxable services for no sales tax cost. Small and emerging companies will have to incur additional costs just to do business and to implement new tax-reporting mechanisms, which will limit their growth.
- Pyramiding taxes. Taxing services increases the potential for services and goods to be taxed more than once, which leads to higher consumer costs.
- Competitive disadvantage. States with service taxes are at a disadvantage when it comes to competing with states that don’t tax services. HB 1628 would discourage the use of Maryland services, as well as discourage companies seeking to expand or relocate here. Note that none of our competitor states in the region broadly tax services. In fact, only Hawaii, New Mexico and South Dakota do.
- Taxing services will disproportionately affect those who can least afford it. The tax rate is the same for all consumers, no matter their income. If more services become taxable, a larger portion of the disposable income of lower-income individuals than that of higher-income individuals will go toward sales taxes.
- Administrative burden. Service providers, many of whom are independent contractors or small business owners, will now have to face a new administrative burden. As the Maryland Association of Certified Public Accountants (CPAs) has pointed out, other states like Florida and Michigan have tried to tax a broad range of services only to quickly repeal them due to the complexity of administration, among other reasons.
- Difficult to enforce due to geographic challenges. For example, if an accountant is serving a client who owns gas stations in Maryland, Virginia and Washington, D.C., “it is unclear what state the service is being delivered from and what state the service is delivered to,” said Tom Hood, chief executive of the Maryland Association of CPAs, in the Baltimore Sun.
Just wow…lower the overall sales tax…sweet…but start taxing services like day care and other (most all) services provided by businesses of all sizes? Really…that is the direction we want to head?
I know more than a few parents likely to be upset by their EXTREMELY high day care costs going up with this new tax.
I also wonder what this is going to do to all of the new work, tracking and reporting that will be thrown at small businesses with this legislation. This will put an additional burden and strain on small businesses already feeling the pressures day in and day out. Why add to the burden on small businesses?
I get that the legislators in Annapolis are looking to find a way to fund the Kirwan legislation…but is this really the best way?
Have thoughts…let me know in the comments.