What it Means To Subcontractors
Federal Government Contracting
A Tax That Doesn't Compute
Tuesday, November 27, 2007; The Washington Post, Page A16
Neither The Post nor the Maryland legislature appears to understand the scope of the recently enacted sales tax on computer services ["Experts Divided on Md. Tax Package's Effects," Metro, Nov. 20].
The Post has portrayed it as a tax on computer repair and so-called geeks-on-call services. But the categories taxed -- facilities management; programming; system planning, design, and integration; and hardware-software installation, maintenance and repair; and others -- are a catalogue of what takes place in computer-related research, development and federal government subcontracting. That is where the tax will fall most heavily.
Companies that contract out programming and system development will be hit hard. That includes the information technology, biotech and bioinformatics areas that Maryland has tried to nurture.
The federal government's immunity from direct state taxes does not extend to its contractors and subcontractors. The Federal Acquisition Regulation clearly indicates that when a sales tax has a major impact on contract pricing, the affected activity should be moved elsewhere. That will seriously damage subcontractors, both large and small, and will force prime contractors to move out of state.
Stanley A. Klein
State Government Contracting
Business to Business