The state Senate may not go along with the consensus Gov. Martin O?Malley said he?s finding for “broadening” the state sales tax to cover more services such as vehicle repairs, barbershops and beauty shops.
“I don?t think it?s going to happen,” said Senate President Thomas Mike Miller, D-Calvert and Prince George?s.
The majority leader and new vice chairman of the Senate Budget and Taxation Committee agreed. “I can?t see that happening,” said Sen. Ed Kasemeyer, D-Baltimore and Howard.
In February, the chairman and three fellow Washington-area delegates introduced a bill extending the sales tax to cover services such as parking, cable TV, engineering, consulting, direct mail, temporary personnel, tax preparation and property management as well as car repairs and haircuts.
The legislation produced one of the session?s largest and most contentious hearings. Small-business owners of every stripe packed the halls to testify against the bill, which does not tax some professional services, such as law, accounting and advertising.
Legislative analysts said expansion of the sale tax to more services would raise $664 million. Coupled with a sales tax increase to 6 percent, that means it would raise almost the entire $1.5 billion projected deficit.
House Speaker Michael Busch, D-Anne Arundel, said there are 168 taxable services and Maryland taxes 38 percent of them, whereas other states tax 50 percent to 80 percent. “Our sales tax base is very narrow and geared to the manufacturing sector,” Busch said.
But taxing services would put Maryland business at a disadvantage, said Karen Syrilo, tax consultant for the state Chamber of Commerce. “It would be very easy to buy services from other states.
“By definition, a sales tax on services hurts small businesses rather than big businesses,” Syrilo said. “Small businesses have to buy their services from outside providers.”
Making a host of new businesses collect the sales tax also creates administrative headaches, said Sen. Rona Kramer, D-Montgomery, a new Budget and Taxation subcommittee chair. “You create a whole new cadre of vendors for the state.
“That?s not the most efficient way to raise taxes,” Kramer said.
