Maryland Gov. Martin O’Malley (D) on Monday defended his proposal for a sales tax on “digital products,” which would make a 99-cent iTunes download cost $1.05, for example, and a proposed “Amazon tax” that would require sales tax to be collected on certain goods purchased online.
“What we would like to do is collect the sales tax that’s actually owed,” O’Malley told Mark Segraves on WTOP, in an interview that touched on his ambitious legislative agenda and budget for fiscal year 2013.
Forcing online retailers to collect the state’s 6 percent sales tax on digital downloads and other online purchases would generate a combined $26 million, the governor’s office estimated — a drop in the bucket next to Maryland’s $1 billion budget shortfall.
The proposal — which comes amid a suite of plans to raise more revenue in taxes, including raising the income tax on six-figure earners and phasing in a sales tax on gasoline — is likely to draw forceful opposition from online retailers.
Owing to a Supreme Court decision, online retailers such as Amazon generally don’t have to collect sales tax from customers in states where the retailer does not have an office, warehouse or other “physical presence.”
But some states, driven both by budget gaps and urging from brick-and-mortar stores that claim to face a competitive price disadvantage, have challenged Amazon over the sales tax issue with mixed results. Earlier this month, Indiana’s governor announced Amazon will start collecting that state’s 7 percent sales tax in 2014.
Anticipating critics, O’Malley on Monday sought to draw a clear line between the proposal and the ill-fated “tech tax” that was repealed in 2008 only months after its passage.
“This is nothing like that, but detractors would like you to believe it’s a repeat,” O’Malley said.
The “tech tax,” which was a tax on computer services such as data processing and custom software design, caused an uproar among technology and business groups when it was enacted during a special session of the state legislature in the fall of 2007.
The General Assembly passed a bill repealing the tax in April 2008.
O’Malley called the tech tax “the shortest lived and most ill-conceived revenue measure ever passed by the Maryland General Assembly,” and called the special session in which it passed the “especially horrible session.”