As of July 1, 2008, you should include a new charge at the bottom of your invoices: "Maryland Sales & Use Tax: 6%." Actually, Maryland doesn't really care if you charge this 6% tax to your customers. However, you WILL report your company sales to the State and include a check for 6% of that amount, whether or not you collected it from your customers.

Many in our community see a problem with this:

• Businesses generally are quite talented at avoiding easily avoided taxes, especially when those taxes represent material sums of money.
• <6% becomes material very fast.
• It is easy in many segments of the "computer services" industry to purchase competitive, quality service from geographically distant vendors.
  

Therefore, as a result of this tax, some amount of Maryland computer service revenue will be lost, both to out-of state vendors and to customers bringing computer service functions in-house.

Don't think that your customers will simply accept this tax and pay it without a thought. Some will ask you to make a price concession…or else. "As much as we love your services, we have a fiscal responsibility to evaluate other options that are readily available. Isn't there anything you can do to keep your cost competitive?"

Let's pretend you need to make full price concessions to keep all your customers. So multiply your revenue by 6%. Now, what's your profit margin this year? How do these two numbers compare? Feeling queasy yet?

At the very least, many of us will be distracted by this tax, jockeying to minimize its impact. Many of us probably will have to make some price concessions, cutting deeply into our profit and slowing or derailing plans for reinvestment and growth. Even worse, for some this tax could lead to lost clients and layoffs. Finally, if the yet-to-be-written regulations apply the law in full force, I firmly believe some companies will be put out of business unless they quickly hustle across the border. (All of this, by the way, reduces both the State's business and income tax bases.)