Maryland has passed legislation that will impose a new 3% sales and use tax on a wide range of digital and technology-related services, effective July 1, 2025. This change is expected to significantly impact businesses providing or purchasing IT, data, and software services in the state.
The new law broadens the definition of taxable services to include:
- Data services
- Information technology services
- System and application software publishing
- Computing infrastructure, web hosting, and related services
- Web search portals, libraries, and other information services
- Computer systems design and consulting services
These categories align with sectors 518, 519, 5132, and 5415 in the 2022 North American Industrial Classification System (NAICS).
In addition, Maryland is eliminating the sales tax exemption for custom computer software and related services, regardless of how the software is delivered or accessed. This means that even fully customized software solutions and associated services will now be taxable starting July 1, 2025.
Businesses should assess their exposure to this new tax and prepare for compliance ahead of the effective date.
