The states controversial new tax would apply to services like cloud storage and cryptocurrency mining.
Just as Canada has rescinded the digital services tax that would have gone into effect Monday, residents in one U.S. state are going to have to deal with them from their states government. On Tuesday, Maryland is set to enact a series of tax changes that will see business owners pay an extra 3 percent on technology services, such as cloud storage and application hosting.
Its a levy that passed with limited public input and it has many business owners up in arms. While the money it raises will help lower Marylands budget deficit and be used for the states education reform plan, the extra expenses could be burdensome for business owners, especially given the continuing threat of tariffs and the volatile state of the economy.
What will this tax mean for businesses? Weve got answers.
Prior to this tax going into effect, certain types of technology were exempt from taxes. That changes on July 1, as services such as data storage and processing, website hosting, server hosting, and software publishing will all be taxed at a 3 percent rate. Other affected services, according to the Maryland comptrollers office, include cryptocurrency mining, game server hosting, archiving services for movies, music, and news clippings and stock photo services.
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Technically, businesses that sell digital services are responsible for collecting the tax and paying the government. Ultimately, though, like any levy, customers will payand in this case, that largely means businesses, as many of the areas to which the new tariff applies are typically business to business expenses. The Maryland Freedom Caucus, a conservative bloc that opposed the tax, posted an email on its Facebook page that Zoom reportedly sent to enterprise customers in the state notifying them about the upcoming price increase. (Zoom did not reply to Incs request for comment on the email.)
The Maryland Chamber of Commerce estimates the tax will impact over 15,000 businesses and 99,000 workersand says consumers wont be spared either. In a world where technology touches everything, from your work and childs education to your healthcare, this tax could make essential digital services unaffordable for many Maryland families, widening the digital divide, it wrote.
Accounting firm Ellin and Tucker warns businesses that even if they dont provide technology services, they could still have some exposure to this tax. It advises companies that operate in multiple states to see if theyre exempt from collecting this tax by providing a certificate of multiple points of use. If the service is used simultaneously in more than one jurisdiction or if it is resold, unchanged, to another affiliate, responsibility for collection and remittance of the tax shifts to the buyer.
The goal, say state fiscal analysts, is to raise $483 million in the first year of the tax. The following year, its expected to bring in $684 million and by 2030, its forecast to bring in $747 million. If those figures prove accurate, that would be the largest recurring source of revenue the state has seen in years.
Its not just Republicans who are not happy with this tax. Maryland Delegate Brian Crosby, a Democrat, says the tax could drive away businesses that were thinking of headquartering in the stateand could drive out some that are already there.
The Cybersecurity Association of Maryland warns of harsh consequences, calling the tech tax a short-sighted attempt to gain revenue at the cost of our security and future economic stability. And the state Chamber of Commerce says the tax could be disastrous for Marylands economy, businesses and jobs.
One company is already leaving. Crosby owns a subcontracting business that works with the Department of Defense. He moved that business to Virginia as the bill was passed.
We know the numbers, Crosby said. All I can say is that within a year, wed file for bankruptcy.
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