Small tech and defense contractors urge relief from Maryland’s 3% technology services tax

Sen. Hester presented SB 600 to the Budget and Taxation Committee as a targeted fix to last year’s extension of a 3% tax to certain information‑technology services. The sponsor said the initial collections were concentrated: 1,596 companies remitted tax in the first quarter, but roughly 38 firms in the custom programming sector paid the majority of the revenue.

"The total number of companies who paid this tax were 1,596... they remitted a total tax during this quarter of $12,200,000," the sponsor said. She told senators many of the affected companies are small, mobile, and could relocate because neighboring states do not impose a similar structure.

A steady stream of Maryland small businesses and service‑disabled veteran‑owned firms told the committee SB 600 is necessary to prevent job losses and preserve Maryland‑based contracting capacity. "Last year's tech tax significantly impacted our ability to operate," Jacob Stokes of Belay Technologies said. He told senators his firm cut Maryland jobs and recruitment because the additional tax burden made operations uncompetitive.

Business owners and trade groups emphasized narrow, clarifying language in SB 600: carve‑outs for resold services or transactions within an affiliated group, and alignment so the tax does not result in multiple stages of taxation on the same value chain. The Maryland Tech Council and regional chambers expressed willingness to work with lawmakers to craft narrowly targeted language that protects state revenue while not driving essential employers away.

Supporters and the sponsor acknowledged the state faces near‑term fiscal constraints; proponents said SB 600 targets a small group and that preserving the state’s tech and defense industrial base is a higher‑value long‑term economic strategy.