By now you’ve heard that the Maryland legislature has enacted a new 3% tax on technology services, to take effect on July 1. You probably have questions about how this will affect your business, and frankly, not all of the details have been resolved yet. Let’s take a look at what we do know:
As we have said from the beginning, this is not a tax on technology providers but a tax on all businesses, as it encompasses products and services that virtually every organization uses. The tax will encompass certain business categories under the North American Industrial Classification System (NAICS).
It’s worth noting that the new tax will exist side by side with the current 6% sales tax, meaning that a given product or service may carry one tax or the other, but not both. Beyond that, cybersecurity solutions were originally exempt from the tax, but that is no longer the case.
Subject to the new Tech Tax are IT support and consulting services such as those offered by Hill Tech Solutions, data backup and recovery, cloud services used by most businesses (AWS, Google Drive, etc.), custom software development, video streaming infrastructure and a list of less common services.
The tax will furtherapply to software installation, and even to services traditionally associated more with marketing, such as website development and hosting.
We advise that you consult both with your technology provider and with your financial professionals to determine the scope of the services used by your company that are likely to be taxed beginning in July. More details are available in this bulletin from the Maryland Comptroller’s Office.
