Labor in Maryland is generally not subject to sales tax. The state charges its 6% sales and use tax only on a specific list of services written into the Tax-General Article, plus a newer 3% tax on certain data and technology services. Everything else you do for pay — haircuts, auto repair, plumbing, residential cleaning, professional advice — falls outside sales tax entirely. That does not mean the money is untaxed. Wages and self-employment income from labor are always subject to Maryland state and local income tax, and if you work for yourself, federal self-employment tax as well.
Services That Do Carry the 6% Sales Tax
Maryland’s 6% sales and use tax applies to physical goods and to a defined list of services.1Comptroller of Maryland. Sales and Use Tax – Taxpayer Services If a service is not on the list, the provider does not charge sales tax on the labor. The listed services include:2Maryland General Assembly. Maryland Code Tax-General 11-101
- Custom fabrication, printing, or production of goods to a customer’s order
- Commercial cleaning of textiles for business clients on a recurring basis
- Cleaning of commercial or industrial buildings
- Telecommunications, including cellular service, “900” services, custom calling features, answering services, and prepaid calling arrangements
- Pay-per-view television
- Credit reporting
- Detective, guard, and armored car services, plus security system installation and monitoring
- Transportation and delivery of electricity or natural gas when the underlying energy sale is itself taxable
Leasing or renting tangible goods is also taxed at 6%, treated as a property transaction rather than as a service.3Comptroller of Maryland. Sales and Use Tax List of Tangible Personal Property and Services A business that rents equipment or vehicles collects sales tax the same way a retailer does.
The 3% Tax on Data and Technology Services
As of July 1, 2025, Maryland taxes data processing, web hosting, software publishing, and related information technology services at a reduced 3% rate. The rule was enacted through the Budget Reconciliation and Financing Act of 2025 (House Bill 352) and targets services classified under NAICS Sectors 518, 519, and 5415. If your work involves cloud computing, data analytics, or custom software development for Maryland customers, you have a collection obligation at that 3% rate.
Labor That Isn’t Subject to Sales Tax
Most everyday services are not on the taxable list, so no sales tax applies to the labor. Haircuts, auto repair, landscaping, plumbing, electrical work, general construction labor, and residential house cleaning all fall outside sales tax. So do professional services such as legal advice, medical care, and accounting.
One caveat matters for tradespeople: the exemption covers the labor, not the parts. If you sell taxable physical goods as part of the job, the goods portion is taxable even when the labor is not. A plumber doesn’t charge sales tax on the work of installing a faucet, but the replacement faucet itself may be taxable.
Admissions and Amusement Tax Is a Separate Tax
Maryland’s admissions and amusement tax is often mistaken for sales tax but operates independently. It’s a local tax on businesses that provide entertainment, recreation, or sports activities — concerts, movies, use of recreational and sports facilities, equipment rentals at those facilities, and sales at nightclubs and similar venues.4Comptroller of Maryland. Admissions and Amusement Tax The tax is imposed on the business receiving the revenue rather than added as a line item on the customer’s bill, and rates vary by county and municipality. Where both sales tax and admissions tax could apply to the same rental, the combined rate is capped at 11%.5Comptroller of Maryland. Business Tax Tip 24 – Admissions and Amusement Tax at Recreational and Sports Facilities
Income Tax on What You Earn From Labor
Whether or not the service you provide carries sales tax, the money you earn from it is subject to Maryland income tax. Rates for 2026 are progressive, running from 2% on the first $1,000 of taxable income up to 6.5% on income above $1,000,000 for single filers (or $1,200,000 for joint filers). The 6.25% and 6.5% brackets are new for 2026, so earlier guidance showing a top rate of 5.75% is outdated.6Comptroller of Maryland. 2026 Maryland State and Local Income Tax Withholding Information
Every Maryland county and Baltimore City adds a local income tax on top. For 2026, those rates range from 2.25% in Worcester County to 3.30% in Dorchester and Kent Counties.7Comptroller of Maryland. Withholding Tax Facts 2026 Employers withhold both the state and local portions from each paycheck. If nobody is withholding on your behalf, you are responsible for paying the same amounts yourself.
Self-Employment Tax if You Work for Yourself
Working for yourself in Maryland adds a federal layer that employees never see. The self-employment tax covers Social Security and Medicare at a combined 15.3% for 2026: 12.4% for Social Security on the first $184,500 of net earnings, plus 2.9% for Medicare on all net earnings with no cap.8Social Security Administration. Contribution and Benefit Base Employees split those percentages with their employer; self-employed workers pay both halves.9Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) You can deduct the employer-equivalent half (7.65%) when computing adjusted gross income, which lowers your federal and Maryland income tax, though it does not reduce the self-employment tax itself.
For Maryland state purposes, sole proprietors report business profit or loss on the regular individual return (Form 502), where it is combined with other income and taxed at the individual rates.10Comptroller of Maryland. Sole Proprietorships Maryland does not impose a separate state-level self-employment tax on top of the federal one.
Quarterly Estimated Payments
If your Maryland tax liability exceeds withholding by more than $500, you need to make quarterly estimated payments to the state.11Comptroller of Maryland. Payment Methods The 2026 deadlines are April 15, June 15, and September 15 of 2026, followed by January 15, 2027. You can skip the January installment if you file the complete return and pay the balance by January 31, 2027.12Comptroller of Maryland. 2025 State and Local Tax Forms and Instructions
You generally avoid an underpayment penalty if each quarterly payment equals at least one-quarter of 110% of last year’s tax, or if your total payments cover at least 90% of the current year’s tax.12Comptroller of Maryland. 2025 State and Local Tax Forms and Instructions When income is growing year over year, basing payments only on last year’s figures can leave you short. Federal estimated payments follow the same quarterly schedule; you generally owe them if you expect to owe $1,000 or more at filing, and they must include the self-employment tax. Net self-employment earnings above $400 trigger a federal filing requirement on their own, regardless of total income.
Registering if You Do Owe Sales Tax
Providers of any listed service need a Maryland sales and use tax license before collecting. Permanent licenses are free and available through Maryland Tax Connect at mdtaxconnect.gov.1Comptroller of Maryland. Sales and Use Tax – Taxpayer Services Businesses selling only at occasional events such as craft fairs can obtain a temporary 30-day license instead. Out-of-state providers of taxable services must also register once they exceed $100,000 in gross Maryland revenue or 200 separate transactions in the current or previous calendar year.
The practical takeaway: sales tax, when it applies, is the customer’s money passing through your hands to the Comptroller. Income tax is yours, owed on the profit you keep. Failing to collect sales tax on a listed service leaves you owing the state out of your own pocket, and treating collected sales tax as income inflates the tax bill on the other side.