Maryland’s New Tech Tax: What AAFB Members Need to Know

Government Relations
Jun 27
3 min read

What’s Changing on July 1, 2025?

Maryland is implementing a new 3% sales and use tax on a broad range of digital, data, and IT services under the 2025 Budget Reconciliation and Financing Act (HB 352). This change affects both service providers and buyers, and could influence pricing, contract terms, and compliance responsibilities for many in the creative, marketing, and tech sectors.

Who’s Affected?

Even if you don’t consider yourself a tech company, this may still apply. You should take a closer look if you sell or purchase services such as:

Web hosting or cloud infrastructure
SaaS platforms or licensed digital tools
Custom app or web development
Analytics dashboards or data services

We’ve broken down some common scenarios to help you determine whether this new tax could impact your business

Creative Agencies, Marketing Firms, Freelancers

You may be affected if you:

Provide IT-like services (e.g., custom web apps, hosting, digital platforms, analytics portals, or software licensing)
Resell third-party SaaS, digital tools, or development services
Operate in NAICS 5415, 519, 5132, or 518

Impact:

May need to collect a 3% Maryland sales tax from clients
Update contracts to reflect tax responsibilities
Register for Maryland sales tax collection (if not already)

Agencies or Organizations that Buy Digital/IT Services

You may be affected if you:

Subscribe to SaaS tools, cloud storage, or digital ad platforms
Hire vendors for app development, hosting, or data services

Impact:

Expect to see 3% tax applied to vendor invoices for:

Web platforms
CRM tools
Custom CMS or dashboards
Any cloud-hosted service billed to a Maryland address

Media Buyers & Advertisers

Not directly affected, unless you:

License or resell platforms that meet the taxable digital service criteria
Offer proprietary tech platforms to clients

Education Partners, Nonprofits, and Small Firms

No current exemptions for nonprofits or low-revenue businesses
If you provide taxable services, you must comply, regardless of size

Key NAICS Codes Affected

The tax targets services under the following industry codes:

518: Data processing, cloud hosting, streaming infra
519: Web search portals, information services
5415: IT consulting, software development, systems design
5132: Software publishing and licensing

If your offerings align with any of these categories, the new tax may apply.

Tax Rate & Structure Effective July 1, 2025

Rate: 3% (in addition to Maryland’s 6% sales tax)
Who Pays: Maryland-based and out-of-state vendors serving Maryland customers
Apportionment: Businesses with customers in multiple states may divide the tax burden via use-tax certificates

Why This Matters to AAFB Members

This tax isn’t just about traditional tech companies—the scope is broad and increasingly blurred. If your agency builds digital tools, resells licensed platforms, or develops custom software, you may be required to collect and remit this new 3% tax.

And if you’re a buyer, expect vendors to potentially adjust pricing, update contracts, or pass along the tax in invoices.

What You Can Do Now

This is a moment to prepare, not panic. Start here:

Confirm if your services match the covered NAICS codes
Register with the Maryland Comptroller if tax collection applies
Update contracts to clarify who is responsible for the tax
Review vendor agreements and pricing for potential changes
Talk to your accountant or legal team about compliance

Additional Notes from AAFB

Let’s be clear: This is not legal or financial advice. We’re providing this overview to help members stay informed, not to interpret or enforce tax law.

When new legislation like this goes into effect, there’s often a period of adjustment (for both the state and those impacted). Enforcement, compliance expectations, and interpretation may continue to evolve.

We encourage all members to consult a qualified tax advisor for guidance tailored to their specific situation. We’re actively monitoring the situation and will share updates and resources as they become available.