Maryland Tech Tax: Rates, Digital Ad Tax, and Nexus

The Maryland tech tax is really three separate taxes: a 6% sales and use tax on digital products, a 3% sales and use tax on data and information technology services and software publishing (effective July 1, 2025), and a graduated digital advertising gross revenues tax of 2.5% to 10% that reaches only platforms with more than $100 million in global annual gross revenue. Whether you sell e-books, run a SaaS platform, or buy cloud software for your business, at least one of these applies to you, and several changes that took effect in 2025 caught many businesses off guard.

The 6% Digital Products Tax

Since March 14, 2021, Maryland’s 6% sales and use tax has applied to digital products and digital codes.¹ The statute defines a “digital product” as anything a buyer obtains electronically rather than on physical media, and the standard 6% rate applies.²

The definition in Tax-General § 11-101 reaches:³

Prerecorded or live audio: music, audiobooks, speeches, podcasts, ringtones, and audio greeting cards sent by email.
Video: movies, music videos, news and entertainment programs, live events, video greeting cards, and video or electronic games.
E-books, meaning any book transferred electronically.
Digital periodicals: newspapers, magazines, blogs, and chat room discussions.
Digital codes: any number, barcode, or alphanumeric sequence that gives the buyer the right to obtain one or more digital products, excluding gift cards with a general monetary value.

It does not matter whether you download a file permanently or stream it once. The tax applies regardless of whether you gain lasting ownership. A digital code sold on a physical card at a retail store is taxable, because the code provides access to a digital product.³

The 3% Tax on Data, IT, and Software Publishing Services

Effective July 1, 2025, Maryland added a separate 3% sales and use tax on data and information technology services and on software publishing services. It reaches businesses classified under NAICS sectors 518 (data processing and hosting), 519 (other information services), subsector 5415 (computer systems design), and subsector 5132 (software publishing).⁴

In practice, the 3% rate reaches services that were previously untaxed in Maryland: data processing, cloud hosting, IT consulting tied to software systems, and packaged software publishing. If your business buys data analytics tools, pays for managed hosting, or licenses enterprise software, the tax applies to those purchases. Data processing services are no longer exempt from Maryland tax.

How SaaS Fits Between the Two Rates

Software as a Service can meet the definition of both a digital product and a software publishing service. The Comptroller’s guidance decides the rate by looking at how the software is used.⁴

SaaS purchased or licensed for commercial use in an enterprise computer system is taxed at 3%, whether the system runs on-premises, on the vendor’s servers, or on a third-party cloud.
SaaS purchased for individual use rather than an enterprise system is taxed at 6%.

When a product qualifies under both rates, Maryland law requires that the higher rate apply. So a SaaS tool used outside an enterprise system falls to 6%. A solo consultant buying a project management subscription for personal use pays 6%, while a company deploying the same tool across its enterprise system pays 3%.

Custom Software Is No Longer Exempt

Maryland previously exempted customized software from the digital products sales tax. That exemption was repealed effective July 1, 2025. Software or SaaS that is customized, configured, or modified to meet a buyer’s needs is now fully taxable.⁴

If you hired a developer to build bespoke software for your operations in 2024, that transaction was likely exempt. The same purchase today is not. The Comptroller’s guidance states that “customized out of the box” software does not qualify for any exemption from the digital products tax. Businesses budgeting for custom development work need to price in the applicable rate.

The Digital Advertising Gross Revenues Tax

Separate from the sales and use tax, Maryland imposes a tax on gross revenues from digital advertising services. The tax reaches companies whose global annual gross revenues exceed $100 million, and the rate rises in tiers:⁵

$100 million to $1 billion in global revenue: 2.5% of the assessable base.
$1 billion to $5 billion: 5%.
$5 billion to $15 billion: 7.5%.
Over $15 billion: 10%.

Any company earning at least $1 million in annual gross revenue from digital advertising services in Maryland must file a return and make quarterly estimated payments.⁶ The taxable base is apportioned by dividing Maryland digital advertising revenue by total U.S. digital advertising revenue.

The statute prohibits taxpayers from passing this tax through to customers as a separate fee, surcharge, or line item. In August 2025, the Fourth U.S. Circuit Court of Appeals held that the anti-passthrough provision violates the First Amendment and returned the case to the district court. A separate challenge by major tech firms remains pending in Maryland Tax Court. The underlying tax structure has not been struck down. For periods beginning after December 31, 2026, all returns must be filed electronically.⁶

What Falls Outside the Tax

Section 11-101 carves several categories out of the digital product definition:³

Professional services delivered electronically, where the primary purpose is the service. An accountant emailing a financial analysis or a lawyer sending a legal memorandum is providing a service, not selling a digital product.
Live, non-prerecorded educational instruction by schools and higher education institutions, and live interactive training for a buyer’s current or prospective business.
Live, interactive seminars or discussions hosted by nonprofit organizations or business associations.
Software and SaaS bought solely for use in an enterprise computer system, which sits outside the digital product definition but may still be taxable at 3% as a software publishing or IT service.

Resale and Multiple Points of Use Certificates

If you buy a digital product or code for resale, for incorporation into another product for sale, or for transfer as part of a taxable service, you can give the vendor a resale certificate at the time of purchase.¹ The certificate has no required form but must include your name, address, and Maryland sales and use tax registration number, which is always eight digits starting with a zero or one.⁷

Businesses that deploy a digital product or SaaS across employees in multiple states can reduce their Maryland tax by filing a Multiple Points of Use (MPU) certificate. This requires Comptroller authorization before use, and you must be registered for a Maryland sales and use tax account, submit a separate authorization request for each transaction, and deliver the certificate to the vendor at or before the time of purchase.⁸ When the vendor accepts an MPU certificate, the buyer takes on responsibility for paying tax directly to each state where the product is used, based on the buyer’s own apportionment. The Comptroller can deny authorization for reasonable cause, including fraud, misuse of a prior certificate, or delinquency on your account.

Where the Sale Happens

Maryland sources a digital product sale through a hierarchy rather than a simple billing address.¹ The vendor looks first to its own business location if the buyer received the product there; then to the primary use location, if known; then to the address where the buyer or gift recipient actually received the product; then to an address on file in the vendor’s ordinary business records; then to the address provided at the time of sale, including the payment instrument address. Most online consumer sales resolve at the last two steps. If the resulting address is in Maryland, the vendor collects Maryland tax regardless of where the seller is located.

Out-of-State Sellers and Economic Nexus

Out-of-state businesses selling digital products or taxable services into Maryland must register and collect once they cross either threshold in the current or previous calendar year:⁹

Gross revenue from sales delivered in Maryland exceeds $100,000, or
200 or more separate transactions delivered into Maryland.

Sellers who move product only through a marketplace facilitator may already have tax collected on their behalf. Sellers with direct channels, such as their own website, have to track these thresholds independently.

Registering, Filing, and Paying

Before you collect Maryland sales tax on digital products or services, you need a Maryland sales and use tax license. Register through the Combined Registration Application on the Maryland Tax Connect portal at mdtaxconnect.gov.¹⁰ New businesses can start through Maryland Business Express, which routes to the same application.¹¹ Use the same business name, address, and structure on every Maryland filing to avoid processing delays.

Returns and payments are filed through Maryland Tax Connect. Returns are due on the 20th of the month following the reporting period, with the deadline shifting to the next business day when the 20th falls on a weekend or holiday.¹² Businesses collecting $15,000 or more in sales tax per year generally file monthly. Those collecting less may file quarterly, with returns due April 20, July 20, October 20, and January 20. The Comptroller can move a quarterly filer to monthly if volume rises.

The Timely Filing Discount

Vendors who file and pay on time keep a small share of the tax they collected:¹³

If tax collected is $6,000 or less, multiply by 1.2%.
If tax collected exceeds $6,000, multiply by 0.9% and add $18.

The discount caps at $500 per return, and consolidated filers are limited to $500 across all returns combined. Filing or paying late forfeits the discount entirely.

Penalties for Late Filing or Payment

Missing a deadline costs 10% of the tax due, plus interest that accrues per month or fraction of a month on any unpaid balance.¹³ You also lose the timely filing discount.¹⁴ The penalty applies even when you file the return on time but short the payment. If you find you undercollected in a prior period, filing a corrected return quickly limits how much interest piles up.

1
Comptroller of Maryland. Business Tax Tip 29 – Sales of Digital Products and Digital Codes
2
Maryland General Assembly. Maryland Code Tax-General 11-104
3
Maryland General Assembly. Maryland Code Tax-General 11-101
4
Comptroller of Maryland. Technical Bulletin No. 56 – Sales and Use Tax on Data or Information Technology Services and Software Publishing Services
5
Maryland General Assembly. Maryland Code Tax-General 7.5-103
6
Comptroller of Maryland. Technical Bulletin 59 – Digital Advertising Gross Revenues Tax
7
Library of Maryland Regulations. COMAR 03.06.01.14 – Resale Certificates
8
Library of Maryland Regulations. COMAR 03.06.01.49 – Multiple Points of Use Certificates
9
Comptroller of Maryland. Tax Guidance – Business Taxpayers FAQs
10
Comptroller of Maryland. Tax Guidance – Sales and Use Tax
11
Maryland Business Express. Apply for Maryland Tax Accounts and Insurance
12
Comptroller of Maryland. Tax Guidance – Filing Deadlines and Due Dates
13
Comptroller of Maryland. Sales and Use Tax Application Help
14
Comptroller of Maryland. Maryland Sales and Use Tax – Frequently Asked Questions