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)