Mapmakers face stiff tax burden
- By Alice Lipowicz
- Apr 16, 2009
Unless current tax laws are repealed, federal mapping and surveying contractors will be subjected to a 13 percent withholding rate on the revenues they generate from federal contracts starting in 2012, a trade association official told the Internal Revenue Service at a public hearing today.
The mapping contractors are being hit by a double whammy, said John Byrd, government affairs manager at the Management Association for Private Photogrammetric Surveyors, at the hearing today in Washington.
Under the Federal Acquisition Regulation, mapping and surveying contractors are considered architecture and engineering services firms, which are currently subjected to a 10 percent withholding of their fees from federal contracts. The withholding is meant to ensure that the firms pay taxes on that income.
In addition, a 3 percent withholding is scheduled to go into effect in 2012 under the Tax Increase Prevention and Reconciliation Act of 2005. Under Section 3402 of the law, federal, state and local government agencies must withhold income tax when making payments to people providing property or services.
"With today's economy resulting in slower business and declining revenues, as well as a crunch on credit, the combined 13 percent withholding will drive firms out of business,” Byrd said in his testimony. “We're in the mapping business, not the banking business. Small firms cannot afford to be making interest-free loans to Uncle Sam on 13 percent of their revenue on government contracts. That is more than their profit."
Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.