Maryland sales tax to apply to Computer Services

As part of the special "tax-grab" session of the Maryland Legislature, rather than doing something sensible like eliminating any unecessary spending or otherwise reducing expenditures to address an alleged budget problem, they ultimately went with just trying to increase tax revenue.

One of the things that was opposed by many constituents and companies was the inclusion of "computer services" into the sales tax increase bill. An amendment was proposed to remove the computer services portion, but that amendment was voted down. So as it stands, computer services will be subject to sales tax. Huh? :confused:

More details can be found at the MD Chamber of Commerce blog which has links to the bill text at MLIS.

The language of the bill that was accepted is as follows:

Article – Tax – General
11–101.
(C–1) (1) “COMPUTER SERVICE” INCLUDES:
(I) COMPUTER FACILITIES MANAGEMENT AND OPERATION;
(II) CUSTOM COMPUTER PROGRAMMING;
(III) COMPUTER SYSTEM PLANNING AND DESIGN THAT INTEGRATE COMPUTER HARDWARE, SOFTWARE, AND COMMUNICATION TECHNOLOGIES;
(IV) COMPUTER DISASTER RECOVERY;
(V) DATA PROCESSING, STORAGE, AND RECOVERY;

(VI) HARDWARE OR SOFTWARE INSTALLATION, MAINTENANCE, AND REPAIR.

(2) “COMPUTER SERVICE” DOES NOT INCLUDE:

(I) INTERNET ACCESS, AS DEFINED IN THE FEDERAL INTERNET TAX FREEDOM ACT;
(II) TYPING OR DATA ENTRY ON WORD PROCESSING EQUIPMENT;
(III) COMPUTER TRAINING;
(IV) THE INSTALLATION, MAINTENANCE, OR REPAIR OF TANGIBLE PERSONAL PROPERTY OTHER THAN COMPUTER HARDWARE OR SOFTWARE THAT INCLUDES COMPUTER HARDWARE OR SOFTWARE AS A COMPONENT PART; OR
(V) A SERVICE OTHERWISE DESCRIBED IN PARAGRAPH (1) OF THIS SUBSECTION THAT IS PROVIDED AS PART OF OR IN CONNECTION WITH:
1. ELECTRONIC FUND TRANSFERS, FINANCIAL TRANSACTIONS, AUTOMATED TELLER MACHINE TRANSACTIONS, OR OTHER BANKING OR TRUST SERVICES;
2. BUSINESS MANAGEMENT, ACCOUNT MANAGEMENT, PERSONNEL, PAYROLL, EMPLOYEE BENEFIT, OR OTHER ADMINISTRATIVE SERVICES;

3. EDUCATIONAL, LEGAL, ACCOUNTING, ARCHITECTURAL, ACTUARIAL, MEDICAL, MEDICAL DIAGNOSTIC, OR OTHER PROFESSIONAL SERVICES; OR
4. TELECOMMUNICATIONS SERVICES.

It seems quite ambiguous with regards to the list of "does not include". Does it mean that an outside vendor working on a problem with the accounting
software or any hardware involved in the accounting dept. is not subject to sales tax? Is outside vendor work on a companies' web or email server taxable because it's not related to business management? Is all in-house tech support excluded? One would think so. Is network security analysis or protection measures considered 'services'? Is any work done on a network or computer used for professional services, banking, or in business management excluded?

Apparently, web design is included.

I still have several questions myself on exactly what this law is supposed to apply to, besides the obvious why or how can a sales tax legally be applied to services. I think it is ridiculous and bizarre to say the least. The fact that such legislation even passed just goes to show how out of touch with reality, and their constituents, the MD legislature is. My biggest question is, as a DE company, do I need to collect sales tax for work done for MD clients? If this is so, I will very likely be refusing any such work once this goes into effect.