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

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Both states' economic development officesd have each reached out to Maryland according to two letters obtained by the BaltimorseBusiness Journal. Neither letter mentions the computerf servicestax directly, but both tout their respectivde states as attractive alternatives to John Eckenrode, president of , received a letter from the offerinb information about that state's business environment and work "This letter is not a request for you to considerf a relocation of your operations from the letter said. "Rather, it is a request for you to includee Delaware when you are contemplatingan expansion.
" Eckenroded said he suspects the agencyu searched databases of business information for IT firms in Maryland and reachedf out to other companies as well, becaused the letter was addressed to , CPSI's legal He plans to talk to the Delaware officials, he said. "uI plan on ringing them up and seeinbg what they haveto say," Eckenrode said. "Whgy not, given the current climate in Critics ofthe tax, which will be collectes starting July 1 if lawmakers don't repeap it first, said the interestg by other states brings to realit their warnings of its negative impact.
The tax has generates more than a dozen bills in the General Its defenders, most notably Senate Presideng Thomas V. Mike Miller, argue businesses must help pay for a budgey shortfall the legislature worked to fill in a Novembeespecial session. The tax is expected to generater $200 million each year. But businesses beyond the tech including accounting firms andthe , have joined the push for the repeall because they fear the tax would cause broader harm to the state's economy. Rockville-basecd About Web LLC got a similar letter fromthe . Officialsw touted the state's friendliness to business and low Pennsylvania used to tax computer services but repealed the levyin 1997.
Kevin Ortiz, spokesman for the Pennsylvania economic development saidhe wasn't aware of the lettee from his office soliciting Maryland companies. His officwe is aware of the new tax, but it "probablyg wouldn't change how we approach our marketing he said. "We try not to poachb companies from other Officials from the Delaware economic developmentt office could not be reachedfor comment. Md. firmsa look elsewhere Some companies with branches of their business outside the statre already said they plan to investigateexpansion elsewhere.
, an subsidiary that administers large software systems via the Web for other has put plans to expand at its Annapoli s headquarters on hold because ofthe tax, CEO Andrew Stern told radio in January. The company has since deferred comment to the Maryland Chamberof Commerce, and chambe spokesman Will Burns said the compant is committed to keeping its headquarterw in Maryland but has facilitiesz around the country and the world wher e it plans to shiftr expansion. Doug Whatley, CEO of Hunt Valley-based , said to avoid the added cost from the sales tax he woulf be passing on tothe customer, he is lookingt into doing more work in the company's Texas office.
BreakAway has 110 and about 80 percentg of them work in Hunt Whatley said. The company opened an officd inCorpus Christi, Texas, in 2005 for a specifid project, and it may send more work "It just doesn't make sense for us to plan on drawingh more work here when it will be very difficultr to ever land any contracts," Whatle y said. Todd Pihl, vice president of , a two-man consultinh firm in Rockville, said his company will move to Delawarer if thetax stands. The compan helps drug companies bring their productas to market faster and has to outsourcs softwarewriting services, which could likel be taxed. Pihl has already investigatec the possibility ofa move.
"It turns out it'sd very easy," he "We can move to Delawarwe with very little expenses and avoidthis entirely." Tom president of new IT lobbyinh group the and CEO of Baltimored company Mind Over Machines, said the group planss to make the case that the harm the tax will causew the IT industry will have implicationxs for the broader state economy. Hearings on several bills proposing a repealp of the tax will be heldMarch 12, and the legislaturse must finalize the budget before its Apri 7 adjournment.
Groups such as the Maryland Bankers' Associatioh have joined Fight theTech Tax, a coalitiomn pushing for the repeal, sayinv the tax's added cost will inevitably be passedx from the IT companies to the banks to Banks depend on IT firms for services including recordsx storage, loan processing, ATMs and credit and debi t card processing, said bankers' association spokeswomanm Alison Tavik. Accounting firms KAWG&F and Meegan, LLC have also joined the group. "It'e going to be very costly to our Tavik said. "It's really an unintendedr consequence but the reality ofwhat happens.
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