Maryland has approved legislation (HB 352) expanding its sales and use tax base to include data and information technology services. A new 3% tax rate will apply to specific service categories beginning July 1, 2025.

Key Effective Date

The new 3% sales and use tax takes effect on July 1, 2025.

Overview of House Bill 352

The Maryland General Assembly passed House Bill 352, which was signed into law as part of the FY2026 budget package. The law introduces a special 3% sales and use tax on services defined under NAICS codes 518, 519, 5415, and 5132—including custom software development, SaaS, IaaS, PaaS, and IT consulting services. The Maryland General Assembly also issued detailed guidance on the recent changes here.

Taxable Services

Taxable services now include:

NAICS Codes 518, 519, and 5415

A data or information technology service described under NAICS sector 518, 519, or 5415:

• 518: Computing infrastructure providers, data processing, web hosting, and related services
• 519: Web search portals, libraries, archives, and other information services
• 5415: Computer systems design and related services
   - 54151: Computer systems design and related services
   - 541511: Custom computer programming services
   - 541512: Computer systems design services
   - 541513: Computer facilities management services
   - 541519: Other computer related services

NAICS Code 5132

A system software or application software publishing service described under NAICS sector 5132:

• 5132: Software publishers

Clarification on Tax Rate Application

Importantly, the 3% rate only applies to services that were not previously subject to Maryland’s standard 6% rate; if a transaction was already taxable at 6%, that rate still applies.

Business Considerations

Businesses providing or purchasing affected services in Maryland will need to update tax calculations, review contracts, and adjust compliance processes.

FAQs on Maryland’s 3% IT Services Tax

1. What is the new 3% sales tax on IT services in Maryland?

‍Starting July 1, 2025, Maryland will apply a 3% sales and use tax on certain data and information technology services. This includes services such as SaaS, IaaS, PaaS, custom software development, and IT consulting.

2. When does the Maryland IT services tax go into effect?

‍The tax takes effect on July 1, 2025. Businesses must be compliant by that date.

3. Which services are subject to the 3% tax?

‍Services defined under NAICS codes 518, 519, 5415, and 5132 are subject to the tax. These include:

• Computing infrastructure and hosting
• Web search portals and information services
• Computer systems design and custom programming
• Software publishing

4. Is this in addition to Maryland’s standard 6% sales tax?

‍No. The 3% rate only applies to services that were not previously subject to the 6% rate. If a service was already taxable at 6%, that rate still applies.

5. Who is affected by this change?

‍Businesses providing or purchasing IT and data-related services in Maryland, especially those in software, cloud, and consulting sectors, will be affected. Both in-state and out-of-state providers with Maryland customers should review their compliance obligations.

6. What steps should businesses take to prepare?

‍Businesses should:

• Review the NAICS classification of their services
• Update tax calculation and billing systems
• Adjust contracts if needed
• Consult tax professionals for compliance strategy

7. Where can I find more information?

‍You can find official guidance and legislation details on the Maryland General Assembly’s website or the Department of Revenue portal (insert links as appropriate).

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