On May 29, 2025, the Maryland Comptroller released draft regulations implementing the new 3% sales and use tax on data and information technology services, which is set to take effect on July 1, 2025.¹ The draft regulations list all services that will be subject to the new tax by referencing the NAICS² codes noted in HB 352 and include examples of how the new tax will apply to relevant transactions.

Most notably, the new tax will apply to transactions involving software as a service (SaaS), data processing, and custom computer software publishing. Under current law, SaaS is excluded from the state's 6% sales tax if used in an enterprise environment solely for commercial purposes. Such SaaS transactions will be subject to the new 3% tax, while SaaS transactions that do not meet the legacy exclusion will continue to be subject to tax at the 6% rate. A sale of cloud computing to "qualified cybersecurity businesses"³ is exempt from the new tax.

The draft regulations provide for the use of multiple points of use (MPU) certificates by purchasers who, at the time of purchase, know that they will concurrently use the taxable goods and services in multiple jurisdictions or resell the goods and services in their original form to a related entity. Purchasers must be authorized by the Comptroller to issue the MPU certificates to their vendors, and vendors who receive the MPU certificates are relieved from collecting the tax. The purchaser must use a reasonable and uniform apportionment methodology to determine the amount of tax due in Maryland and must self-assess and pay the tax upon purchase.

The regulations note that for contracts and licenses entered into before July 1, 2025, the tax will not apply even if payment and/or delivery are made after that date. However, if the contract or license calls for periodic subscription payments to be made, any post-July 1 payments will be treated as separate transactions and be subject to the new tax. For contractors making purchases to fulfill a third-party contract, the operative date for determining whether the tax applies is the date of purchase of the taxable goods or services by the contractor, and not the date of the third-party contract.

Implications

The Comptroller has noted that the new tax does not alter the structure or operation of the existing sales and use tax but merely extends its application to additional goods and services — albeit at a lower rate. Nevertheless, taxpayers that are contemplating entering into a long-term contract for affected goods and services may want to consider accelerating those transactions to limit the impact of the new tax. As noted, if the contract or license is completed before July 1 and does not require periodic subscription payments, the entire value of the contract will fall outside of the scope of the tax, even if payment and delivery is made after July 1.

Although the draft regulations state that pre-authorization from the Comptroller is required for a purchaser to issue a valid MPU certificate, the Comptroller has not provided direct guidance as to how affected purchasers should request that authorization. The draft regulations, however, do give clear guidance as to the certificate's required data points. The use of resale certificates for affected transactions will remain the same as for those that historically have been subject to the state's sales and use tax.

Final emergency regulations are set to be published on June 27, 2025, and further guidance will be issued in the form of notices and bulletins.