In January, just as anger over a new tax on computer services was beginning to boil over in Maryland's high-tech sector, Robert Epstein received a call from the Pennsylvania Department of Community and Economic Development.
"This guy called and said, 'I don't know if you've heard of the computer tax coming on board in Maryland. ... Have you ever thought of opening an office in our state or relocating to our state?'" recalled Epstein, president of About-Web LLC, a 52-employee, information technology firm based in Rockville.
After poring over maps last week with Pennsylvania officials courting his and other companies in Maryland, Epstein said he is thinking of moving a large chunk of his business to York, where employees can serve Baltimore-area clients. He's already committed to investing more resources in an office he has in Virginia.
Other technology executives in Maryland tell similar stories of being approached by officials from neighboring states and by commercial real estate brokers looking to capitalize on widespread discontent in the information technology sector over the new tax.
Gov. Martin O'Malley's secretary of economic development, David W. Edgerley, said yesterday that his office is aware that Pennsylvania and Delaware have recently targeted Maryland computer companies. He said he is "monitoring the situation" but does not believe it is widespread.
"It is standard operating procedure behind the scenes to try and take advantage of any opportunity," Edgerley said of states' business development agencies. "I don't think it will be very successful."
But in interviews, executives at Maryland's computer companies said they are more receptive than ever to such advances, and some said they are planning to move at least part of their operations out of state to avoid the recent expansion of the sales tax to the computer services industry.
The new tax, enacted in the final hours of last year's special legislative session, would apply to Web design, computer repair, data processing and other services. It goes into effect July 1 and could produce about $200 million in annual revenue.
An aggressive lobbying effort by business groups during the current 90-day legislative session has produced a raft of bills to scrap or water down the tax, though Democratic leaders in Annapolis say repeal is unlikely. O'Malley has told technology executives that he opposes doing away with the tax.
Debate on the bills is scheduled to begin next month, but some business owners aren't waiting.
"I'm going up next week to Gettysburg to look at property," said Alex Aigner, chief financial officer for Germantown-based DataLab USA, which has roughly 35 employees. He said he has received a "ton of calls" from property agents and state officials in Pennsylvania and Virginia about relocating and referring to the tech tax as the impetus for the calls.
Linda Kaczmarek, president of Visual Data Systems in Columbia, said the tax would make her 23-employee Web-design firm noncompetitive and she has frozen hiring in Maryland. "In order to stay in business, we could not stay in Maryland," she said. "We have offices in North Carolina ... and what we would look at it is potentially reallocating out resources" there.
Lawmakers in Annapolis expressed concern yesterday about potential business migration.
"I think there's a real potential for very bad economic outcomes here," said Del. Murray D. Levy, a Democrat and fiscal expert from Charles County. "Will these companies move? They are highly mobile, and so I suspect a certain amount will."
Economic development officials in neighboring states are cautious about talking about their response to Maryland's tech tax, which does not exist in surrounding jurisdictions.
"We're not putting raids into Maryland ... because we don't want to have a border war," said Gary Smith, a senior official in the Delaware Economic Development Office.
Smith acknowledged, however, that the new tax "definitely presents an opportunity" for Delaware.
Kevin Ortiz, a spokesman for Pennsylvania's economic development agency, said a recent marketing trip to Maryland by agency officials was "coincidental" with uproar over the tech tax. "The issue at these meetings did come up, but our folks did not go down there specifically to look at engaging a specific sector," he said.
Maryland officials said they were less worried about poaching from other states than about home-grown discontent among business owners.
"As for other states marketing within our boundaries, that's not as big a concern as business decisions that will get made as a result" of the tax, said Edgerley, the economic development chief.
He said uncertainty about how the tax will be regulated and about pending legislation is contributing to unease within the business community and making his job more difficult. But he expressed confidence that Maryland would remain an attractive business address for computer companies regardless of the repeal effort.
"The sector is so strong," Edgerley said. The tax "may have a slowing effect" on growth, he said, "but I think the market in our region is so strong that it will continue to grow and be a force."
Greater Baltimore Committee head Donald C. Fry said that position betrays a naivete about the uniqueness of the computer services industry: "Whenever the business community raises concerns about taxes and talks about the possibility of leaving, the state government leaders seem to believe that that's just not going to happen because there are other compelling reasons for them to stay."
The computer services tax is different, Fry argues, because the high-tech industry is "much more mobile. ... You don't have to bring in moving vans. You can do it electronically."
Complicating the issue for both the business community and lawmakers is uncertainty about which companies will be subject to the tax and exactly how it will be enforced.
Comptroller Peter Franchot, a Democrat who supports repealing the tax, is charged with writing the regulations. Joseph Shapiro, his spokesman, said the rules would likely be out in April, at the tail end of the legislative session or even after it's over.
By that point, Epstein might be looking to relocate farther away.
"This whole Maryland issue has made me re-look at the whole landscape," said Epstein, a lifelong Marylander who moved his corporate headquarters from Virginia a few years ago in order to support the state. "I'm talking to some outsourcers in India. ... This computer tax might help me make more money."
gadi.dechter@baltsun.com