The Budget Reconciliation and Financing Act of 2025 (House Bill 352) was signed by the Maryland Governor on May 20, 2025. This bill builds on the state’s 2021 expansion of the digital goods and services tax, imposing a 3% sales tax on a broad range of data and information technology services.
Effective July 1, 2025, system software and application software publishing services as well as computing infrastructure providers, data processing, web hosting and related services are subject to the new tax. This includes any products described under NAICS sectors 518, 519, 5415, and 5132. The expansion on the definition of “taxable services” also includes several items related to licensing of media or software rights and other intellectual property.
Other affected areas include:
This change may also impact existing software and SaaS exemptions that were allowed under the previous changes made in 2021.
While Maryland’s general sales tax rate remains 6%, the new 3% tax will apply only when no higher rate is already in effect. If a higher sales tax rate applies to a particular transaction, that rate takes precedence. If you are a taxpayer in the business of selling these types of products and are not currently registered in Maryland because your products historically have been non-taxable, a review of your product offerings and nexus thresholds will need to be completed ahead of the July 1 effective date to determine if registration and collection of this tax is necessary. A review of available exemptions and the sourcing rules should also be conducted. (Maryland General Assembly, HB 352, May 20, 2025)
UPDATE: The Comptroller of Maryland has issued a technical bulletin that provides additional guidance regarding the state’s 3% sales tax on a broad range of data and information technology services, effective July 1, 2025. See below for some of the key items from the technical bulletin.
There is no exemption on the 3% sales tax for sales of data or information technology services and software publishing services made to affiliated companies. The 3% tax rate applies to the taxable price of the service, whether or not the seller makes a profit from the sale.
If a buyer knows, at the time of purchase, that a digital code, digital product, taxable data service, taxable information technology service, or taxable software publishing service will be used concurrently by the buyer both inside Maryland and outside of Maryland, or if it will be resold in its original form to a member of an affiliated group or a related pass-through entity of which the buyer is a member, the buyer can present the seller with a multiple points of use (“MPU”) certificate at the time of sale. The MPU certificate relieves the seller of the obligation to collect and remit the sales and use tax and shifts the tax obligation to the buyer. If this occurs, a separate MPU certificate is required for each transaction, and each MPU certificate must report the allocation of use in Maryland for that particular sale. In order to issue an MPU certificate, a buyer must have a sales and use tax account with Maryland. The buyer must apply to the Comptroller’s office for authorization to issue an MPC certificate for each transaction.
The technical bulletin provides a listing of the taxable services described under NAICS sectors 518, 519, 5415, and 5132. Some of the services listed include, but are not limited to:
This law change can affect a great number of service providers as well as companies who purchases these services. Digital goods and services that were previously non-taxable may be taxable now. For example, SaaS sold to a business use customer was previously exempt under the B2B exemption and will now be taxable at 3% effective July 1, 2025. Maryland’s 6% general sales tax rate remains in effect, but the new 3% rate will be applicable when a higher rate is not in effect. We recommend that affected sellers review Technical Bulletin 56 so they can see how the law change applies to their business and make any necessary changes in a timely manner. There are specifications on the type of sales (subscription, installment, credit), and the timing of when the contract was entered has an impact on taxability. (Technical Bulletin No. 56, June 10, 2025, Comptroller of Maryland)
UPDATE: Maryland Introduced a Multiple Points of Use Certificate for software and digital services. Beginning July 1, 2025, Maryland allows buyers to use a Multiple Points of Use (MPU) Certificate to apportion sales and use tax on certain digital purchases used both inside and outside the state. This coincides with Maryland’s expansion of taxable services to include data and information technology services and software publishing services under Chapter 604 of the Acts of 2025.
The MPU Certificate can be presented to a vendor at the time of sale when a buyer knows that a digital product, digital code, software publishing service, or data/information technology service will be concurrently used across multiple states or resold to an affiliated entity. With a valid MPU Certificate, the obligation to collect sales tax shifts from the vendor to the buyer or related entity, who must instead report and remit use tax on the apportioned Maryland use. Buyers must register with the Comptroller and request authorization before issuing an MPU Certificate. For each transaction that a buyer would like to a use multiple points of use certificate, they must request authorization from the Comptroller. For subscriptions, they only need to issue a single MPU certificate. The vendor must verify each buyer’s authorization using Maryland’s online system.
To learn more, see Technical Bulletin No. 54, Multiple Points of Use Certificate (MPU), issued by the Maryland Comptroller’s Office, July 1, 2025.