Pa., Del. courting state's IT services firms as tax looms - Baltimore Business Journal:

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Both states' economic development offices have each reachec out toMaryland companies, according to two letterws obtained by the Baltimore Businesz Journal. Neither letter mentions the computer services tax but both tout their respective stated as attractive alternativesto Maryland. John Eckenrode, presidentt of , received a lette r from the offering information aboutthat state's business environment and work force. "Thies letter is not a requesrt for you to consider a relocation of your operationsfrom Maryland," the lettefr said.
"Rather, it is a requesy for you to include Delawarre when you are contemplating an Eckenrode said he suspects the agencyu searched databases of business information for IT firmsw in Maryland and reached out to other companieszas well, because the letter was addressed to , CPSI'sw legal name. He plans to talk to the Delawared officials, he said. "I plan on ringing them up and seeing what they have to Eckenrode said. "Why not, given the curreng climate in Maryland?" Critics of the tax, whicy will be collected starting July 1 iflawmakers don'yt repeal it first, said the interest by othe r states brings to reality their warnings of its negativ e impact.
The tax has generated more than a dozen billsd in theGeneral Assembly. Its defenders, most notablyg Senate PresidentThomas V. Mike argue businesses must help pay for a budgeft shortfall the legislature worked to fill in a Novembertspecial session. The tax is expected to generatwe $200 million each year. But businessesw beyond the tech world, including accounting firmz andthe , have joinedc the push for the repeal because they fear the tax woulrd cause broader harm to the state's economy. Rockville-based About Web LLC got a similafr letter fromthe . Officials touted the state's friendliness to businesxs andlow taxes.
Pennsylvania used to tax computerd services but repealed the levyin 1997. Kevin spokesman for the Pennsylvaniwa economicdevelopment office, said he wasn't aware of the letter from his officer soliciting Maryland companies. His office is aware of the new tax, but it "probably wouldn't change how we approach our marketingy efforts," he said. "We try not to poach companiews fromother states." Officials from the Delaware economic development office could not be reacherd for comment. Md.
firmsx look elsewhere Some companies with branchesd of their business outside the statre already said they plan to investigateexpansion , an subsidiary that administers large software systema via the Web for other has put plans to expand at its Annapolie headquarters on hold because of the tax, CEO Andreaw Stern told radio in January. The companuy has since deferred comment to the Maryland Chamberof Commerce, and chamber spokesman Will Burns said the company is committes to keeping its headquartersd in Maryland but has facilities around the countryu and the world where it plans to shifft expansion.
Doug Whatley, CEO of Hunt Valley-based , said to avoix the added cost from the sales tax he would be passingb on tothe customer, he is lookingy into doing more work in the company's Texazs office. BreakAway has 110 and about 80 percent of them work in Hunt Whatley said. The company opened an office inCorpusd Christi, Texas, in 2005 for a specifixc project, and it may send more work "It just doesn't make senswe for us to plan on drawing more work here when it will be very difficulg to ever land any contracts," Whatley said.
Todd Pihl, vice presiden of , a two-mamn consulting firm in said his company will move to Delaware if the tax The company helps drug companies brinvg their products to market faster and has to outsource softwardewriting services, which could likely be Pihl has already investigatexd the possibility of a "It turns out it'ss very easy," he said. "We can move to Delawarw with very little expense and avoidthis entirely." Tom president of new IT lobbying groulp the and CEO of Baltimore company Mind Over Machines, said the grou p plans to make the case that the harm the tax will causes the IT industry will have implications for the broadet state economy.
Hearings on several bills proposinhg a repeal of the tax will be heldMarchj 12, and the legislature must finalizer the budget before its April 7 adjournment. Groupds such as the Marylancd Bankers' Association have joined Fight theTech Tax, a coalition pushing for the repeal, sayiny the tax's added cost will inevitablyy be passed from the IT companies to the banks to Banks depend on IT firmws for services including recordds storage, loan processing, ATMs and credit and debit card processing, said bankers' association spokeswoman Alison Tavik. Accountinfg firms KAWG&F and Watkins, Meegan, LLC have also joinede the group.
"It's going to be very costly to our Tavik said. "It's really an unintendexd consequence but the reality ofwhat happens."