``Phase 3'' or ``Alien 3''

June 25, 1992

You've heard of Sigourney Weaver's new hit science-fiction movie "Alien 3"? Next week brings "Phase 3" of the Maryland tax law changes and many people will consider it alien.

As with the two earlier stages of the tax changes the state legislature approved last spring, this phase, which takes effect July 1, is fraught with seeming inconsistencies. As part of the legislature's effort to close loopholes in the state sales tax, more were created. As of next Wednesday, for instance, janitorial services such as restroom maintenance, furniture polishing and floor care will be subject to a 5 percent sales tax. However, heating, ventilation and air conditioner cleaning services won't be taxed. Why must janitors come clean, tax-wise, when they buff a floor, but not electrical contractors cleaning a heating duct? Go ask the legislature.

It's probably the same reason that the new expanded sales tax applies to a single ice cream sandwich but not to a dozen of them bought at once. Or that college students on a meal plan won't pay tax on their food, while classmates not on a meal plan will pay tax on campus-bought meals. The legislators' intent, as announced last winter, was to simplify Maryland's stew of a sales tax. They added more ingredients, yes, but it's still goulash.

Among other changes that kick in July 1, residents of five jurisdictions -- Baltimore, Montgomery, Prince George's, Talbot and Allegany counties -- will have their pay withheld at slightly higher rates. So will all residents who earn more than $100,000.

Those five counties took advantage of legislative approval to raise their piggyback income tax rates. The impact on employer payrolls will likely multiply in coming years as more local governments shift a greater portion of their revenue base from property to income taxes.

In the other major change that takes effect in Phase 3, businesses may no longer claim the tax exclusion on purchases for resale of less than $500 when they pay with cash, check or credit card. However, the tax does not have to be collected if the purchaser receives the goods on his or her credit with the supplier, or in certain other cases.

Confusing? Yes, but who said the system would be made simpler? The legislature did? It lied.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.