ANNAPOLIS – Businesses are bristling over a proposed change to Maryland tax law that will net the ailing state $11 million, but leave stores without compensation for collecting sales taxes for the state.
Vendors collect $2.9 billion in total sales taxes for the state. For each $1,000 in collected taxes they get $6 up to $6,000 a month, then $4.50 for every $1,000 in taxes collected thereafter.
The move could save $11.1 million toward closing the $1.3 billion deficit, said an aide to bill sponsor Delegate Sheila Hixson, D-Montgomery, chairwoman of the committee that heard the bill Tuesday.
“It’s one of the things that’s on the table for discussion purposes,” said Vice Chairwoman Anne Healey, D-Prince George’s. “The last time we had fiscal changes, we reduced the discount and then increased it in subsequent years when the financial situation was better.”
The Ehrlich administration has not taken a position on the bill, said a spokesman.
Businesses say they already lose money collecting the tax.
“This is an attack on small business,” said Delegate D. Page Elmore, R- Wicomico, at Tuesday’s hearing. “Anything that punishes businesses for collecting the state’s tax is bad policy.”
“It’s a tremendous effort, liability and hassle for every business,” said Andy Dixon, owner of the Ken Dixon car dealerships in Waldorf. “To myself and virtually every other merchant, the small pittance we get to collect the tax, keep track of the tax, send the tax to the state, and have the potential liability for getting something wrong, already is inadequate.”
But a proponent rejects that claim.
“We had to cut it last year and found out that most states don’t do it,” Delegate Bennett Bozman said. “We thought this would be one place to close, rather than raising a sales tax.”
“Small businesses will lose between $300 and $400 a year collecting money for the state,” said Tom Saquella president of the Maryland Retailers Association, who fears any proposed sales tax increase much more. “It’s not going to put anybody out” of business.
Credit card transactions make collecting the state’s sales tax costly, argued Larry Barnes, comptroller of Routzahn’s furniture in Frederick.
Buy a $1,000 sofa from Routzahn’s with a credit card and the state gets $50 in sales tax, Barnes told the committee. The average credit card issuer gets at least 1.5 percent of the transaction, including the sales tax. Barnes gets 30 cents from the state to collect the $50, while paying the credit card issuer at least 75 cents to receive it.
“If (Maryland) had allocated a fee to merchants, and now they are going to allocate it to the government, it is a revenue issue,” said MasterCard Legislative Vice President William Binzel. “I am somewhat amazed that they are bringing the payment card industry into it.”
Other parts of the bill worry more vendors. The tax bill also would remove seven other credits to businesses for collecting taxes. Five boat dealers and three petroleum companies also fought the measure.
Eleven tax compliance provisions are also included in the bill to increase revenues a total of $72 million this year. “It’s one of the many things we’re considering,” Healey said. “Soon, we’re going to have to pick and choose which of these provisions we’re going to use.” – 30 – CNS-03-5-03