January 22, 2008

Press Release: Fight the IT Tax

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For Immediate Release —

(Rockville, MD) January 21st, 2008 — A coalition of Hispanic chambers of commerce issued a statement declaring the new Maryland sales tax on computer services as inequitable, shortsighted and made without due diligence. The statement from the Hispanic Chamber of Commerce of Montgomery County (HCCMC) in conjunction and with the Maryland Hispanic Chamber, Baltimore Hispanic Chamber, and Prince George?s County Hispanic Chamber was issued in follow-up to the passing of a new Computer Services Sales and Use Tax during the past Maryland Legislative Special Session.

The HCCMC has adopted as its top legislative issue the repeal of the sales tax on computer services which the Maryland Legislature created during a special session in December 2007. "This tax of 6% on IT services is supposed to go into effect June 2008 but it has major problems and we believe needs to be repealed as soon as possible. The tax is intended to bring in sufficient revenue to cover the budget deficit created by poor planning in the State, but will ultimately create substantial problems and not result in the desired revenue," said Jorge Restrepo, chair of the HCCMC. "Taxing services that are so easily outsourced across state (and even national) boundaries is myopic — especially when we have invested decades trying to attract the very same knowledge-economy businesses this measure will push away."

"A six percent tax can easily cause many of these companies to operate at a loss, since profit margins in this sector of industry can typically be less than 5%," says Rick Martinez, president of federal contractor Project Enhancement Corporation and chair of the Maryland Hispanic Chamber of Commerce.

"This tax is a targeted attack on Maryland small technology companies as well as minority-owned tech companies, which ought to be the kind of companies the State is trying to attract." said Carmen Larsen, CEO of IT firm AQUAS Inc. "This tax is saying that Maryland does not want the technology sector to thrive or survive here," she continued. The question beckons why other service industries, where it is much easier to identify a fixed point of transaction like tanning salons, law firms and other retail services, were not taxed? "Why single out one particular industry that is so critical to Maryland's economic future, and force small businesses in every sector to bear the whole burden?" she asked. Minority entrepreneurs view the opportunity of owning and operating a technical services business as a path to improved economic circumstances for themselves and their families. Low-income community members view the success of minorities in this field as a hope for the future of their children.

The tax makes Maryland companies less competitive than those in neighboring jurisdictions, increases costs for Maryland companies and impacts the profitability of government contractors that operate on multi-year low-margin contracts.

The HCCMC strongly believes that the tax will create serious disruption to businesses in all sectors of the economy, because all of those sectors need to rely on IT services. All companies and organizations that depend on tech companies for support will see an increase in their costs. However, the hardest-hit will be those smaller businesses that rely on outside computer services firms as a significant part of their cost structure. Larger companies are less affected because they can either hire in-house IT professionals, or contract through one of their subsidiaries, thereby avoiding the 'Tech Tax.'

"Hispanic Chambers' members are speaking out to put pressure on the Maryland General Assembly to have the 'Tech Tax' repealed," said Restrepo. "Our members are making it very clear to the legislators in Montgomery County that the we are paying very close attention to who is supporting small and minority business and who just giving us lip-service. This is not a partisan issue; it is an economic development issue," he continued.

HCCMC will be making this a key issue in future elections and the organization will play an active role in getting that message out within the Hispanic community in the coming months. It should be noted that the Hispanic population in Montgomery County is an ever growing and increasingly powerful voting block.

"The tax is not only bad policy but was established with no input from the business community nor the community as a whole, making it bad government all around," said David Fraser-Hidalgo, chair of the advocacy effort and Principal at Sandglass Systems, a web development company. It must be remembered that small business is what drives and sustains our economy and tax base. The HCCMC strongly encourages active involvement by all small business owners and employees in contacting your state legislators to voice your opposition to the 'Tech Tax' and asking legislators to take immediate action to repeal the tax. Visit www.fightthetechtax.com for more details on how you can help.

The Hispanic Chamber of Commerce of Montgomery County (HCCMC) is a nonprofit organization established in 1998 to represent Hispanic business in the county.

Further Information:

Jorge Restrepo
President of the Board
(240) 453-0606

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