July 15th, 2025
NEW TAX ALERT – Maryland Adds 3% Sales Tax to Tech Services
Posted in: Tax Law Tagged: Jeremy M. Vaida
Author: Jeremy M. Vaida
On July 1st, Maryland’s first in the nation Tech Tax took effect. The tax imposes a new 3% levy on a variety of tech services, such as cloud computing, web hosting, e-magazines, software publishing, IT consulting, data processing, and even Bitcoin mining. While limited exemptions and planning opportunities exist, sellers of these and similar services should be ready to file Sales and Use tax returns with the Maryland Comptroller on August 20th.
Action Plan
- Sellers must review their offerings against the NAICS-defined list and register with Maryland Tax Connect if subject to the tax.
- Update contracts to reflect the 3% tax for new work and change orders effective immediately.
- Consider multiple points of use (MPU) allocation to mitigate tax exposure when selling to buyers who operate both in and out of Maryland.
- Check for exemption eligibility, particularly for cybersecurity, Discovery District companies, or Maryland’s standard exemptions such as sales to charitable or religious organizations or sales to federal, state, or municipal governments.
Maryland’s new “Tech Tax” expands the definition of services subject to Maryland’s Sales and Use Tax regime to include data services, information technology services, system software publishing services, and application software publishing services described in the 2022 edition of North American Industrial Classification System (NAICS), United States Manual, under sectors 518 and 519 and subsectors 5132 and 5415. NAICS subsector 5132. These categories include: (1) computing infrastructure providers, data processing, web hosting, and related services; (2) web search portals, libraries, archives, and other information services; and (3) computer systems design and related services. A full list of the covered services can be found at the end of the Maryland Comptroller’s Technical Bulletin No. 56.
The law imposes a 3% Sales and Use Tax rate on the sale of these services, which is levied against the buyer, but is collected and remitted by the seller. As a result, all newly subject sellers must register online at Maryland Tax Connect.
However, in certain circumstances, sellers are not required to collect the Tech Tax. Specifically, any sales to cybersecurity firms or to companies located in Maryland’s Discovery District at the University of Maryland are exempt. Furthermore, standard exemptions to Maryland’s sales tax, such as sales to charitable or religious organizations, sales for resale, or sales to federal, state, or municipal governments still apply.
In addition, if a buyer knows, at the time of purchase, that taxable tech service will be used both inside and outside of Maryland, 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, shifting that obligation to the buyer. In order to issue an MPU Certificate, a buyer must have a Sales and Use Tax account through Maryland Tax Connect.
Maryland’s new 3% Tech Tax is here, and it’s not business as usual. From cloud services to crypto mining, the compliance burden—and planning opportunity—is real. Whether you’re a provider, consumer, or advisor in the tech space, now is the time to reassess contracts, pricing, and nexus. This isn’t just a Maryland issue, it’s a sign of how states are rethinking digital taxation. Don’t get caught off guard!
