On March 26, 2025, the Maryland House of Delegates passed its tax-related budget bill (HB 352), which includes a new 3% sales tax on data and information technology services. The new tax was announced by Governor Wes Moore as part of a budget agreement he reached with House and Senate leaders. HB 352 now goes to the Senate for consideration.

The proposed legislation, beginning July 1, 2025, would expand the definition of "taxable service" for sales and use tax purposes to include:

• Data or information technology services, as described under NAICS Sector 518, 519, or 5415
• System software or application software publishing services, as described under NAICS sector 5132
• The licensing of media or software rights and other intellectual property, including:
• Production and distribution of computer software protected by copyright
• Intellectual property, including intellectual property protected by trademark or copyright
• Sporting-event broadcasts and other media rights
• Television-program broadcasts
• Distribution of specialty programming content
• Syndicated media content

The proposed legislations would tax the listed services at a 3% rate, rather than the general 6% Maryland sales tax rate. If a different rate could be imposed, however, the higher of the two rates would apply.

The proposal comes after lawmakers abandoned an earlier measure (HB 1554/SB 1045) that would have imposed a 2.5% sales tax on many business-to-business services. (SeeEY Tax Alert 2025-0640.) That proposal, which was significantly broader in scope, was widely opposed by the Maryland business community.

Implications

In 2021, Maryland expanded its sales and use tax to cover a wide range of digital goods and services, while allowing broad exception for many software and SaaS transactions. It is unclear how this new proposal would affect those exceptions.

The proposed expansion would apply to a broad array of service transactions, most notably:

• Data processing, hosting and related services under NAICS 518
• Computer systems design and related services, including computer facilities management services under NAICS 5415
• Other information services, including "supplying information, storing and providing access to information, searching and retrieving information, operating websites that use search engines to allow for searching information on the Internet, or publishing and/or broadcasting content exclusively on the Internet" under NAICS 519

Unlike the earlier proposal, Maryland Governor Wes Moore, along with House and Senate leadership, have indicated support for the expanded tax. The approved House bill is now before the Senate for consideration. If amendments are made by the Senate, the legislation would go back to the House, which can either concur with or reject the Senate amendments. If the House rejects, the bill would go to conference committee.

EY will be closely monitoring this development and will issue additional Alerts as warranted.