Maryland to introduce 3% sales tax on IT and software services starting July 2025

Starting July 1, 2025, Maryland will apply a 3% sales and use tax rate to data or information technology services and system software or application software publishing services. The state’s standard tax rate is 6%. The tax will apply to both business-to-business (B2B) and business-to-consumer (B2C) transactions, with the legislation allowing for potential rate increases in the future. Maryland will, as a result, adopt a multiple points of use (MPU) exemption starting July 1, 2025.

The bottom line: In early 2025, Maryland considered expanding taxes to cover more B2B services at a 2.5% rate. The proposal failed, despite estimates that it would have raised about $944 million in 2026. The state now faces a difficult situation: it plans to cut $2 billion from its budget but still needs to find $1 billion in new tax revenue to balance its books. Officials want to expand sales taxes to modernize what they consider an outdated tax system.

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