Maryland Imposes a New ‘Tech Tax’

Maryland is at it again.  

Back in 2021, the Old Line State introduced the nation’s first digital advertising tax. A Federal District Court ruling in 2024 allowed the tax to stand after a lengthy legal battle with the U.S. Chamber of Commerce (as this Tax Policy Center report details). Now the state has enacted a new 3% sales tax, effective July 1, 2025, on a broad range of data services and information technology services. 

Maryland’s general sales tax rate is 6%, and the new tax – commonly known as the ‘tech tax’ – will be imposed only when no higher rate applies. The expanded list of taxable services for sales and use tax purposes includes: 

• Data hosting, processing and related services
• System software and application software publishing
• Computer systems design and related services; this includes programming services and facilities management services
• Other information services involving supplying, storing and providing access to information. This includes publishing and/or broadcasting content exclusively on the Internet. The organizations affected will include libraries and archives as well as web search portals and news syndicates. 

Notably, sales of cloud computing services to “qualified cybersecurity businesses” are exempt from the new tax, according to an EY rundown. Determining whether a service is subject to Maryland’s tech tax can be difficult given the multifaceted nature of several data and technology services. Here’s how Maryland’s Comptroller suggests that determination should be performed: “Each service a vendor provides must be evaluated individually to determine its taxability. The list of data or information technology services and software publishing services subject to the 3% sales and use tax is listed in Section IV of this document. The Comptroller’s Office has also submitted the list of services to be published in the Code of Maryland Regulations (“COMAR”) as regulation 03.06.01.48. The vendor must use industry standards and common definitions in its analysis.” (Here’s the document – an 11-page technical bulletin published in June – noted in the response mentions.) 

Maryland’s new rules will add to the indirect tax compliance burden for companies offering digital services in the state. If that includes your organization, and you are not registered in the state because such services are historically non-taxable, you may want to review your product offerings and nexus thresholds to determine whether you need to register and collect the tax. This report from the Sales Tax Institute can help on that account.