Maryland Chamber to Lawmakers: Small Business Services Tax ‘Short-Term Fix, Long-Term Problem’ for State Economy

Annapolis, Md. — The Maryland Chamber of Commerce, representing more than 7,000 businesses — large and small, across every industry, and in every corner of the state — expresses serious concern regarding legislation (HB 1554/SB 1045) that would expand the sales and use tax to business-to-business (B2B) services.

This legislation would apply new taxes to transactions between businesses for accounting, landscaping, payroll and technology services, creating significant economic challenges for Maryland's diverse business community.

This proposal isn’t just another tax — it’s a direct hit to Maryland’s small businesses. When a local restaurant, tech startup, or landscaping company has to pay more for accounting, human resources or IT support, they have two choices: raise prices on customers or cut costs elsewhere — often through job losses. That’s not an economic growth strategy. It’s an economic misstep.

“When we talk to our members — from main street shops to manufacturing facilities — they tell us they're already navigating thin margins and fierce competition,” said Mary D. Kane, President & CEO of the Maryland Chamber. “This tax makes Maryland a more expensive place to do business, pushing companies to consider neighboring states like Virginia and Delaware, where they wouldn’t face these extra costs. We should be working to attract businesses, not driving them away.”

At a time when Maryland is striving to strengthen its economic competitiveness, the Maryland Chamber has identified several alarming consequences that this tax proposal could cause:

• A Blow to Small Businesses: Unlike large corporations, small businesses operate on thin margins and depend on outsourced services to operate. Forcing them to absorb new taxes on essential services like payroll, bookkeeping and technology support puts them at a severe disadvantage.
• Competitive Disadvantage: This tax would make Maryland an outlier among neighboring states. Do we really want to see businesses relocate to Virginia or Delaware simply to avoid these additional costs? Every business that leaves takes jobs, tax revenue and economic vitality with it.
• A Short-Term Fix That Hurts Long-Term Growth: While this tax may provide a temporary revenue boost, its long-term consequences will outweigh any short-term gains. Higher costs for businesses mean reduced hiring, lower wages and a weaker overall economy, which ultimately leads to lower tax revenues in the future.
• A Precedent for More Tax Hikes: Today, this tax targets professional services like accounting and landscaping — but once this structure is in place, what’s next? Legal services? Healthcare? Businesses and consumers alike should be asking where this ends.

The Maryland Chamber urges business owners and citizens to contact their legislators and voice opposition to HB 1554/SB 1045. Maryland’s economic future depends on policies that encourage growth, investment and job creation — not ones that make it more increasingly expensive to do business in our state.

“Maryland’s budget challenges require smart, sustainable solutions — not quick fixes that undermine our long-term economic success,” continued Kane. “Instead of raising new taxes on businesses, we should be asking: How do we make Maryland the best place to grow, invest and create jobs? That’s the path to a stronger economy and sustainable revenue.”

The Maryland Chamber remains committed to working with lawmakers on policies that foster economic growth and competitiveness.

To learn more about the proposed tax and how it would impact Maryland’s businesses and communities, visit fairopportunitymd.org.