Maryland’s New 3% Tech Tax Arrives July 1, 2025: What Businesses Need to Know

Beginning July 1, 2025, Maryland will impose a new 3% sales and use tax on a wide range of data and information technology services, under legislation recently signed into law through the 2025 Budget Reconciliation and Financing Act (BRFA). Commonly referred to as the “tech tax,” this new provision is designed to expand Maryland’s taxable service base to better reflect the state’s growing digital economy.

The tech tax will apply to services associated with the technology sector as defined under several North American Industry Classification System (NAICS) codes:

• Software publishing services (NAICS 5132)
• Data processing, web hosting, and related services (NAICS 518)
• Web search portals, libraries, archives, and all other information services (NAICS 519)
• Computer systems design and related services (NAICS 5415)

This sector includes services such as cloud storage and application hosting (e.g. Amazon Web Services, Wix, Google Drive), web and server hosting, data backup, video streaming support, Software as a Service (SaaS), and IT consulting. Even website development, business software provisioning, and software installation may fall under this tax umbrella. It is also important to note that the primary business NAICS code does not determine whether the business is subject to the tax. If a business performs any services included in the NAICS codes, these would be considered taxable services.

Importantly, a transaction will be taxed at either the 3% tech tax rate or the existing 6% sales tax—but not both. For instance, if a service qualifies as a sale of tangible personal property or a digital product, the full 6% sales tax applies instead.

The law also introduces exemptions for qualified tech development contracts involving the University of Maryland Discovery District and its research partners in the field of quantum computing.

For multi-jurisdictional service use, buyers can provide a certificate of multiple points of use (MPU). This applies in two situations:

1. The service is simultaneously used in more than one jurisdiction.
2. The service is resold, unchanged, to another affiliate or pass-through entity.

The MPU certificate relieves the seller of the obligation to collect and remit the sales and use tax and shifts the responsibility to the buyer. The buyer must use a reasonable method of apportionment to determine the level of use in Maryland and remit the tax based on Maryland use alone.

How Businesses Should Prepare:

Understand Your Service Lines

Even if your business does not primarily provide technology services, there could be exposure. Analyze each of the services provided to determine if there is any sales tax liability due. Maryland has provided a detailed list of applicable services here.

Understand Your Users

The buyer can ensure that the tax accurately reflects the true Maryland portion using an MPU certificate. This certificate will shift obligation to the buyer, so carefully weigh the additional cost and administrative burden against any tax savings. The buyer always has the option to pay the amount of sales tax based on the full purchase price.

Understand Timing

Timing and contract execution will determine whether the service is taxable or not during the initial implementation. You can find scenarios and examples here involving subscriptions, contracts, and installment sales.

Register for Sales and Use Tax and Maryland Tax Connect

For many businesses, this change is a new tax regime. Reference the Sales and Use Tax FAQs here for more information about registering and remitting the tax.

Stay Informed

Expect additional guidance before, during, and after the July 1 implementation date.

While the introduction of Maryland’s tech tax brings added complexity, it also offers an opportunity for businesses to reassess how they deliver and utilize taxable technology services. With careful planning, clear documentation, and proactive engagement with the tax professionals at Ellin & Tucker, navigating these changes can be both manageable and strategic. Remember—you don’t have to do it alone. Stay informed, ask questions, and lean on your advisors to help ensure compliance while minimizing disruption to your business.