Maryland Businesses Face a New 3% Tech Tax: Here’s How to Avoid Costly Mistakes Before July 1st

You run a forward-thinking, tech-driven business. Cloud platforms, custom-built software, and data solutions are part of your daily operations. But beginning July 1, 2025, Maryland’s new 3% sales and use tax on certain IT and digital services could increase your operating costs—and affect the contracts you already rely on.

Important Changes Are on the Way

Maryland’s Comptroller has issued draft regulations to implement this new 3% tax, targeting services like:

• Software as a Service (SaaS)
• Data processing
• Information Technology
• Custom software publishing

Even if your services were previously exempt under the state’s legacy rules, those protections may no longer apply. For example, SaaS used in commercial enterprise environments—currently exempt from the 6% state sales tax—will now be covered taxed under the new 3% tax structure.

Key Considerations from the Draft Regulations

• Many previously exempt services such as IT consulting will be subject to sales tax.
• Contracts executed before July 1st are not subject ot the new tax—but only if they do not include periodic subscription payments.
• Ongoing subscriptions that continue past July 1st will be taxed as separate, taxable transactions.
• If your services cross state lines, you may be eligible to use Multiple Points of Use (MPU) certificates—but you must obtain pre-authorization from the Comptroller.

What You Can Do Right Now

To prepare for the new tax:

1. Review all vendor and client contracts. Are there any long-term service agreements that can be finalized before July 1st?
2. Identify recurring payments. If any subscriptions or licenses extend beyond the deadline, plan for how they’ll be treated under the new rules.
3. Evaluate your eligibility for MPU or resale certificates. If applicable, securing the right documentation now can prevent future tax liabilities.

Get Ahead of the Deadline—Stay in Control

By acting now, you’ll enter the new fiscal period with confidence. Your agreements will be structured to your advantage, your tax strategy will be updated, and you’ll avoid last-minute compliance issues.

Let Us Help You Stay Ahead

The final regulations are expected by June 27, 2025, with enforcement beginning just days later. For support navigating these changes, reach out to HBK SALT Advisory Group at hbksalt@hbkcpa.com with any questions about these changes