Maryland's 3% Sales Tax on IT and Data Services: Who Pays and What Is Exempt

Since July 1, 2025, Maryland has charged a 3% sales and use tax on certain data services, information technology services and software publishing services. Owners often call it the Maryland tech tax, the IT tax or the software tax. Whether it reaches your business depends less on what you call your product and more on what the activity is under the state's NAICS definitions, and on whether you are selling the service or buying it.

This guide covers what the tax reaches, who collects it and who pays, how the SaaS rule can produce a 6% or a 3% rate for the same product, which exemptions exist, and what the reported revenue numbers show. Confirm current law with the Comptroller before you file or price a contract.

Disclaimer: This guide is informational content, not legal or tax advice. Tax treatment depends on your facts. Consult a qualified CPA or tax attorney before you rely on any position in this guide.

What the 3% Tax Covers

The tax comes from Section 4 of Chapter 604 of the Acts of 2025 and appears in the rate provision at Tax-General Section 11-104(l). It took effect July 1, 2025. The Comptroller of Maryland explains how it applies in Technical Bulletin 56, first issued June 10, 2025 and updated June 30, 2025. Check the bulletin for the current version before you rely on any specific example.

The 3% rate applies to activities in these NAICS categories (2022 NAICS):

• Sector 518, data processing, hosting and related services
• Sector 519, other information services
• Subsector 5132, software publishers
• Subsector 5415, computer systems design and related services

The most important rule in this list is that taxability follows the NAICS activity description, not the code a business reports on its own paperwork. If your activity fits the description, the tax can apply even if your registration or filing uses a different code. If your activity does not fit, using a code in these sectors does not make it taxable. Describe what you actually do, then compare that description to the bulletin.

Who Collects and Who Pays

This is a sales and use tax. A vendor that sells a taxable service to a Maryland buyer generally charges the tax to that buyer and remits it to the Comptroller. Businesses that receive taxable services without being charged the tax may owe use tax on those purchases. Ask the Comptroller how this applies to your specific vendor and purchase, especially for services bought from out of state.

The general state sales tax rate is 6%. The 3% rate is a separate rate for the listed services, and the SaaS rule below determines which rate applies to a subscription. Do not assume a flat 3% applies to every software invoice you receive.

The SaaS Rule: Why the Same Product Can Be 6% or 3%

Software as a service (SaaS) is the category that confuses most buyers and sellers. Technical Bulletin 56 addresses it with a stacking rule. A SaaS subscription bought for individual use is treated as a digital product taxed at 6%. The same subscription bought for commercial use in an enterprise computer system is treated as a taxable service taxed at 3%. When both could apply, the higher rate controls.

In practice, the same product can carry two different rates depending on who uses it and how:

Use of the SaaS	Treatment	Rate
Bought for individual use	Digital product	6%
Bought for commercial use in an enterprise computer system	Taxable service	3%
Both could apply	Higher rate controls	6%

A design app a person buys for personal projects falls under the individual-use line. The same app that a company buys for its staff to run inside its enterprise systems falls under the enterprise line. Keep records that show how each subscription is used, because the rate depends on that use, not on the product name.

Custom software needs separate attention. Before July 1, 2025, custom or customized software and SaaS had an exemption. That exemption was repealed effective July 1, 2025, so a custom build or a customized platform is not exempt for that reason alone. Whether it is taxable depends on the activity and the buyer's use, as described above.

Exemptions: What Exists and How to Claim Them

Technical Bulletin 56 describes two exemptions that apply to specific situations:

• Cloud computing sold to a qualified cybersecurity business. The exemption covers cloud computing services sold to a business that qualifies as a cybersecurity business under the bulletin's definition. Confirm the definition and the qualification steps with the Comptroller before you rely on it.
• Quantum computing work in the University of Maryland Discovery District. The exemption covers sales to, and by, a qualified company in the University of Maryland Discovery District in Prince George's County. The company must contract with UMD's Applied Research Laboratory for Intelligence and Security on quantum computing. Confirm eligibility with the Comptroller and with the university before you claim it.

Both exemptions depend on qualifying facts, and neither applies because a business simply operates in these industries. The Comptroller does not issue exemption certificates for these purposes. Instead, the buyer gives the vendor proof of eligibility and keeps records supporting the exemption. A vendor that accepts that proof and a buyer that keeps good records are in a much stronger position than one that relies on a verbal explanation.

Technical Bulletin 56 also describes Multiple Points of Use certificates in Part C. If you buy services that are used in more than one location or jurisdiction, read Part C and ask the Comptroller whether that certificate fits your situation.

What the Reported Revenue Shows

Press reports attributed to the Comptroller's office put FY2026 collections at about $112.8 million from about 2,900 payers. The original forecast was near $500 million. We have not confirmed these figures on a Comptroller release, so treat them as reported figures, not audited results. Use the official Comptroller publications for any number you cite in a business plan, budget or contract.

The gap between the original forecast and reported collections is one reason the tax has drawn attention from lawmakers. For a business owner, the practical point is that the rules can change, and the rate and exemptions in this guide may not stay the same.

The 2026 Legislative Session

Several developments from the 2026 session bear on whether this tax will change:

• At the March 2026 crossover deadline, the Senate narrowly defeated a budget-bill repeal of the tax.
• SB 600, a bill that would have created a business-inputs exemption, did not advance.
• We could not confirm the end-of-session outcome for these efforts.

Repeal efforts are expected to continue. Do not treat the 3% rate or the current exemptions as permanent. Check the Comptroller for current law before you finalize pricing, tax registration or a contract that depends on the tax treatment.

Steps to Take Now

1. Describe your activities in plain terms. Compare each service you sell or buy to the NAICS descriptions in Technical Bulletin 56, not to the code on your filing.
2. Separate individual-use from enterprise-use subscriptions. Track which software is used by individuals and which runs in a company's computer systems, so you can apply the 6% or 3% rate correctly.
3. Register if you will collect the tax. If you sell taxable services in Maryland, register for a sales and use tax permit through the Combined Registration Application on Maryland Business Express at https://businessexpress.maryland.gov/start/taxes-and-insurance.
4. Collect and keep exemption proof. If you claim either exemption, get the vendor's supporting proof and file it with your records.
5. Review your vendor invoices. If a vendor charges no tax on a service that may be taxable, ask the vendor and the Comptroller how the tax applies before you assume you owe nothing.
6. Get a professional review for complex cases. Mixed business models, custom development, multistate customers and enterprise licensing deals often need a CPA or tax attorney.

Official Resources

• Comptroller of Maryland: https://www.marylandcomptroller.gov/ (search for Technical Bulletin 56 and confirm the current version)
• Maryland Business Express, taxes and insurance: https://businessexpress.maryland.gov/start/taxes-and-insurance
• Maryland Business Express: https://egov.maryland.gov/businessexpress

The 3% tax is a fast-moving area of Maryland law, and the rules can change. Keep this guide as a starting point, verify each point with the Comptroller, and bring your own facts to a qualified professional before you act.