I read Transcript of Nov 18, 2007 House Proceedings discussing Computer Services tax posted on this web site.  I was supprised by SUB Chair's comments about DC's sales tax applied to the custom programming.  Here is the quote from the SUB Chair:

"And before I allow you to give your follow up question, let me just put this into perspective by pointing out that custom programming is already taxed in the District of Columbia, Delaware, and West Virginia. That information services are taxed currently in the District of Columbia, Delaware, and West Virginia. And data processing services are taxed, have sales tax applied to them in the District of Columbia and Delaware. Got a little avalanche here."

We have IT service contracts in the District of Columbia. Some of our contracts are  custom computer programming.  I am not aware of any sale taxes the DC government imposing on the services at all.  We aslo work with IT firms located in DC from time to time to bid on the IT service contracts, we had never been informed that sale tax need to be applied nor being charged for the sale tax in DC.  Am I ignorant or SUB Chair just made things up out of thin air to justify his/her position on imposing the computer service tax in Maryland?  Who is SUB Chair?

By the way, where can I find a complete list of State Delegates and Senators with their positions on the Computer Service Tax issue?

I worked for Ernst & Young in DC in 2000. The MD headhunter I worked for attempted to charge them the custom programming "sales" tax of 12%. (12%?!) EY shot back at them and refused to pay it. Whatever the case may be, they are tax consultants among other things, so I hope they know something about this issue. I don't know what may have changed in 8 years, but I thought you might find that story of interest to you.

Hello TechGlobal,

Respectfully, I'm sorry to report that you are just being (blissfully) ignorant.

There *IS* a tax on Computer Services in DC. I was in the same position as you, A Maryland Company blissfully providing services to clients in MD, DC and VA, when one of my clients in DC got audited for "Use Tax", (which is the tax that DC companies they are supposed to pay if not charged sales tax). The DC Tax Authority saw invoices from my firm and then audited ME for compliance - and asked me to pay BACK sales tax for 5 years for all my DC clients. Of course I hadn't been collecting that tax, but I was responsible for paying it. This was a huge amount of money and might have bankrupted me.

I possibly could have refused the audit and/or refused to pay the tax, but at the risk of having a judgement against me in DC and possibly having my income attached with a DC client.

I eventually worked out a settlement I could live with, but not until after tens of thousands in attorney fees plus the settlement itself.

This is NOT very well known, but as DC gets more aggressive about collecting it, I think you will be hearing about it more and more. My accountant didn't really know about it either. Sorry to have to wake you from the ignorantly blissfully state. It's a pretty rude awaking.

Regards,

Peter Schmidt

Hi John,

Thank you for the message.  Currently our work in DC is through subcontracting to a prime contractor in VA.  The client is DC Government.  Is DC Government exempt from the sale tax?  May be that is why we did not have to pay the sales tax?

Minna

I second Peter's comments.  DC Govt has recently started to go after a lot of technology firms for sales and use tax.  In addition to my company, I know of two other firms that do business in the District that have been assessed in the last few months.  We have used 3 accountants in the last 6 years and none of them thought our services (web design and development) were subject to sales tax remittance.

We are in the process of fighting the findings now.

Regards,
Adam