Effective July 1, 2025, Maryland expands its tax base to include a range of digital and IT services.
Businesses Offering Tech and Software Services in Maryland—Here’s What You Need to Know
If your business sells or subscribes to data services, cloud computing, or IT consulting in Maryland, you’ll want to pay attention. Starting July 1, 2025, the state is imposing a new 3% sales and use tax on a broad range of technology-related services. This change will directly impact service providers and buyers alike—especially those operating under certain NAICS codes.
What’s Changing: Maryland’s Expansion of Taxable Services
Under Maryland’s 2025 legislation, the definition of taxable services is being broadened to include:
- Data and IT services (NAICS sectors 518 and 519): Includes cloud storage, web hosting (excluding software publishing), application hosting, data processing, game server hosting, and more.
- Software publishing services (NAICS subsector 5132): Covers packaged software, mobile app publishing (non-custom), and software for games.
- Computer systems and IT design services (NAICS subsector 5415): Includes CAD/CAM/CAE design, custom software programming, computer disaster recovery, and IT systems integration consulting.
A full list of affected services can be found in Section IV of the Maryland Comptroller’s [Technical Bulletin No. 56].
Key Clarifications:
- Taxability is based on the service, not the business’s NAICS code. Even if your company is registered under a different code, if you sell a covered service, the tax applies.
- SaaS is taxable. If SaaS is sold for enterprise use, it’s taxed at 3%. For personal use, it’s considered a digital product taxed at 6%.
- Timing matters. Renewals or payments made after July 1—even if the contract was signed before—may still be subject to tax depending on how the sale is structured (e.g., subscription vs. installment vs. credit sale).
- No affiliate exemption. Charges for internal services among affiliated companies are taxable unless another exemption applies.
Action Steps for Businesses Operating in Maryland’s Tech Sector
- Evaluate your services. Check whether your offerings fall under the specified NAICS codes.
- Update contracts and pricing. Include tax where applicable in post–July 1 invoices and renewals.
- Review your sales systems. Ensure billing platforms can apply the 3% tax correctly.
- Use Multiple Points of Use (MPU) Certificates if applicable. If services are used both inside and outside Maryland, this can help apportion tax responsibility properly.
How TaxValet Simplifies Compliance with Changing Tax Laws
When state tax laws shift, TaxValet makes sure you don’t miss a beat. If you're a TaxValet client, we’ll proactively review your service offerings against changing tax codes, apply the correct tax rates, and help you navigate tricky renewals and subscription taxability. We’ll even manage exemption certificates like MPU forms so your team doesn’t have to.
Unsure if this affects your business? Reach out for a free consultation, and we’ll walk you through it. Schedule your consultation.