Maryland has expanded its sales tax base to include digital products and codes, as the House on February 8 and the Senate on February 12 overrode Governor Larry Hogan’s (R) veto of 2020 House Bill 932. The new law is effective 30 days after the override vote (i.e., March 14, 2021). 2020 H.B. 932.
Action item: Taxpayers selling or using digital products in Maryland will need to update their compliance processes for the imposition of sales and use tax. Specifically, compliance systems will need to be able to classify sales according to the digital products and codes definitions, monitor sourcing locations for correct rates of tax, and collect and remit the appropriate tax.
The Department of Legislative Services’ Fiscal and Policy Note discusses the sales tax base erosion in the “digital age,” and mentions that 30 states tax digital products in some form. Although Maryland expanding the sales tax base to include digital products is not surprising, complying with the tax may prove burdensome.