Mark Kleinschmidt
President/CEO
Dear Members,
I wanted to give you an update on the new “Tech Tax” that will go into effect on July 1 since there is still so much uncertainty. Maryland’s new “Tech Tax” imposes a 3% tax on the sale of data and information technology. Unlike any other state in the country, Maryland’s Tech Tax utilizes NAICS codes to define which services are subject.
The law will impact a range of businesses engaged in these services, including software developers, digital service providers and tech contractors, particularly those selling to other businesses in Maryland. Companies using cloud services, SaaS platforms, or digital infrastructure may also be taxed indirectly via pass-through costs.
In many cases, collecting and accounting for the new Tech Tax will require registering with the State, managing the tax money they collect and making monthly payment. Lack of clarity in legislation leads to inconsistent interpretations and compliance concerns.
To help any business that may be impacted by the new Tech Tax, check out this video of a webinar that helps answer questions concerning what counts as a “digital product” as opposed to a “digital service”.
Our partner, the Maryland Chamber of Commerce, shared this video of a recent webinar that helps clarify questions about pre-existing contracts, double taxation and the Tech Tax’s applicability to government contractors, among many other issues. and how bundles (like a software license for services) are treated.
It is truly unfortunate and unfair that the State is turning IT businesses into tax collector and increasing their cost of doing business. Many people believe and I agree that the Tech Tax will limit innovation and growth in Maryland’s tech industry.
Moving Forward,
Mark Kleinschmidt
President/CEO