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Some Takoma Park business owners are crying foul over the taxes they pay on inventory and equipment each year, a tax not levied on their competitors in surrounding unincorporated areas like Silver Spring.

A 2.5 percent tax is levied from businesses in Takoma Park on their inventories each year, according to Maryland State Department of Assessments and Taxation statistics. City businesses are also charged a tax on their equipment, such as refrigerators or even cash registers. Because the taxes fall under the personal property tax category, the City Council has the authority to exempt city businesses from the tax, a move many business owners and representatives are urging the council to consider.

Larry Silverman, who owns S&A Beads in Old Town Takoma Park, is a lead proponent of the city abolishing the tax. He pays $1,500 to $2,500 a year on inventory taxes alone, he said; a significant amount considering how low sales have been during the prolonged recession.

"You calculate your inventory at the end of the year, and if you have a lot, it means you had a bad year, and then you pay the most taxes on top of that," he explained. "It's particularly important not to discourage us from giving our customers what they want; our customers want a larger selection."

Takoma Park is the only one of the 32 "Main Street" communities in the state — so recognized for their dedication to the economic well-being and appearance of their local business districts — that does not exempt its businesses from the tax, according to SDAT records. A total of 29 member communities offer 100-percent exemptions from the inventory tax. The rest offer partial exemptions, except Takoma Park.

Despite the fact that Silverman has the support of a number of important local business networks, including the Old Takoma Business Association, the problem arises from the fact that the city generates up to $130,500 a year from taxing business inventories, according to Councilman Josh Wright (Ward 1).

The city is already preparing to face a second round of budget cuts from the state within the next two weeks — on top of the $577,000 it lost last month — so any proposal that would diminish the city's resources further would seem to be a risky move.

"I don't want to be in a position where we're putting our businesses at a disadvantage [with this tax]," Wright said when reached for comment. "I'm generally in favor of having some taxes on businesses, but it doesn't really work if you have all the taxes in one little area."

At the same time, Wright is uncertain about some details regarding taxes in surrounding areas. The council will have to conduct extensive research into what areas pay which taxes and the potential ramifications of keeping or exempting the tax in the city before a decision is made, he said.

"It's unlikely that this budget year we will be able to just abolish the tax," he said. "It would just be financially impossible."

Roz Grigsby, the executive director of the Old Takoma Business Association, is convinced that by exempting city businesses, the council will eventually benefit more from the vibrant business economy she says will result than it would from levying the taxes each year. Untaxed businesses would draw more customers and help maintain the city's property values, she said.

"I think the model of making [at least] a partial exemption would be a step in the right direction," she said. "In the long term it allows businesses to stay in Takoma Park; the reality right now is the business climate here in Takoma Park is very tough and we might see more closures [if nothing is done]."

While a tax on Takoma Park businesses that is not levied in Silver Spring initially seems unfair, the extra taxes paid by businesses in downtown Silver Spring, a special tax district, might make up for some of the disparity, according to Jane Redicker, president of the Greater Silver Spring Chamber of Commerce.

"Businesses here pay higher taxes on other things in general because they're in an urban district," she said. "We're not a city like Takoma Park, so the businesses that are in the central business district pay higher taxes for services [like] trash pickup, landscaping, clean-up ... the kind of services that a city government would pay for if it were a municipality."

Jude Garrett, who owns Now & Then, a gift boutique on Laurel Avenue in old town, cited the revitalization of downtown Silver Spring as one of the biggest influences on the recent decline of business in Takoma Park. She has seen a drastic reduction in business over the last year.

"It's strictly an economic thing, I don't remember ever, ever suffering and struggling the way we are right now," she said, adding that the $826 she paid to the city's inventory tax last year does not help. "It's a chunk of money that I really need to be using to pay my outstanding invoices."