A new Tech Services Tax changes the math for SaaS
If you sell into Maryland and haven't updated your sales tax strategy lately, you could be undercollecting. The state rolled out a new 3% Tech Services Tax in July 2025 that applies to SaaS, cloud hosting, and data processing — and simultaneously eliminated the exemption for custom software.
The quick version: $100,000 in sales or 200 transactions triggers nexus. SaaS and related tech services now face a combined 9% rate (6% + 3% Tech Services Tax).
For businesses in the tech space, selling into Maryland now means managing multiple tax rates for different digital products.
Maryland sales tax rate table
| Field | Value |
|---|---|
| State base rate | 6.0% |
| Average combined rate (state + local) | 6.00% |
| Local add-on range | 0% (no local taxes) |
| Maximum possible combined rate | 6.0% (9.0% for tech services) |
| Rates vary by county / city | No |
| Destination-based or origin-based | Destination-based |
Maryland keeps general sales tax simple with a single statewide rate of 6% and no local jurisdictions adding sales tax. Remote sellers only need to collect the flat 6% rate — except for tech services, which carry an additional 3%.
$100,000 or 200 transactions
Maryland requires out-of-state sellers to collect sales tax once they exceed $100,000 in gross sales or 200 transactions into the state. This rule has been in effect since October 1, 2018, and applies to both taxable and exempt sales combined.
- Maryland looks at your sales from either the previous or current calendar year.
- Sales through marketplace facilitators like Amazon or Etsy count toward your threshold, but if the marketplace already collects tax, you won't need to collect it again.
- Once you cross either threshold, register by the first day of the month following when you met it.
A new 3% Tech Services Tax stacks on top of 6%
Maryland made headlines in 2025 by imposing a new 3% Tech Services Tax on software and digital services, effective July 1, 2025.
| Product / service | Tax treatment |
|---|---|
| SaaS (B2B and B2C) | Taxable at 9% total (6% + 3% tech tax) |
| Downloaded software (permanent license) | Taxable at 6% |
| Custom software | Taxable at 6% — exemption repealed |
| Streaming / subscription software access | Taxable at 9% (6% + 3%) |
| Cloud storage & hosting | Taxable at 9% (6% + 3%) |
| Data processing / information services | Taxable at 9% (6% + 3%) |
| E-books, music, video downloads / streaming | Generally exempt |
| Digital images & fonts | Likely exempt |
B2B relief: Maryland allows business buyers to use a Multiple Points of Use (MPU) certificate to allocate tax based on where software is actually used. If employees use SaaS across multiple states, this reduces Maryland tax liability.
Product taxability in Maryland
| Product category | Tax treatment |
|---|---|
| Groceries & unprepared food | Exempt |
| Prepared food & restaurant meals | Taxable at 6% |
| Candy & soft drinks | Exempt (treated same as groceries) |
| Clothing & apparel | Taxable at 6% |
| Footwear | Taxable at 6% |
| Prescription drugs | Exempt |
| Over-the-counter medications | Exempt |
| Medical devices & durable equipment | Exempt |
| Agricultural inputs | Exempt |
| Manufacturing machinery & equipment | Exempt |
| Raw materials used in manufacturing | Exempt |
| Electricity & gas used in production | Exempt (manufacturing use only) |
| Computers & business equipment | Taxable at 6% |
Candy and OTC medications: Maryland exempts both — broader than typical, since many states tax OTC items while exempting prescriptions.
Maryland does not currently offer any sales tax holidays
Given Maryland's recent expansion of sales tax to digital services and technology products, the state has focused on broadening its tax base rather than creating temporary exemption periods.
Filing and registration
Registration
Maryland's sales tax is administered by the Comptroller of Maryland, not a traditional Department of Revenue. Register online through bFile or submit a Combined Registration Application. Registration is free and typically processes within 5 to 10 business days.
Filing frequencies
| Frequency | Assigned when… |
|---|---|
| Monthly | Average liability of $100 or more per month |
| Quarterly | Average liability under $100 per month |
| Annual | Available for very low-volume sellers (under $300/year) |
Returns and payments are due on the 20th of the month following the reporting period.
Large-filer rules
Businesses with average monthly liability exceeding $15,000 must make accelerated payments due by the 20th of the current month.
Penalties and interest
- Late filing: 25% of the tax due
- Late payment: 25% of unpaid tax
- Interest: compounds monthly, currently around 11.5% annually
Vendor discount: 0.9% for timely filed returns, capped at $500 per return — applies to both sales tax and the Tech Services Tax.
Not sure which of these apply to you?
We map your Maryland exposure — the new Tech Services Tax, MPU certificates, custom software rules — and tell you exactly what to do next.
Not home-rule — and not an SST member
Maryland is not a home-rule state. The state uses a single 6% rate statewide with no county or city add-ons — register once with the Comptroller, and you're covered for the entire state.
Maryland is not a member of the SST agreement, neither as a full nor associate member. You'll need to navigate Maryland's rules independently, though the lack of local taxes already keeps things simpler than many states.
Voluntary Disclosure Agreement (VDA)
Maryland offers a formal VDA program administered directly by the Comptroller, plus a path through the MTC.
Lookback & relief
Maryland's standard VDA lookback is 3 years. Without a VDA, Maryland can assess up to 4 years during an audit. Penalties are waived entirely; interest is owed in full for the lookback period.
Eligibility & process
You're ineligible if Maryland has already contacted you. Start with an anonymous pre-application through the MTC or directly with the Comptroller. Expect 60 to 90 days from pre-application to signed agreement.
Who should consider one: if you've had nexus for years, especially selling SaaS or tech services now subject to the 3% tax, and haven't collected — a VDA caps your exposure and eliminates penalties.
Audit risk in Maryland
The Comptroller takes a moderate-to-aggressive enforcement stance, particularly around tech services and digital goods following the July 2025 rollout. Expect heightened scrutiny if you're a SaaS or IT services provider.
Common audit triggers
- High volume of exempt sales without supporting documentation, especially MPU certificates
- Inconsistent or late filing patterns, particularly after hitting nexus thresholds
- Businesses in tech, software, and digital services sectors — prime targets post-2025
- Claiming the now-repealed custom software exemption after July 1, 2025
- Underpayment or confusion between the 6% general rate and 3% tech services rate
Statute of limitations
Maryland can assess tax for 3 years from the filing date; no limit for non-filers or fraud. A VDA limits this exposure to just three years.
Recent changes & unique rules
A new 3% tax on IT and digital services, on top of the standard 6% rate, applying to SaaS, cloud hosting, and data processing.
SaaS and related tech services face a 3% rate, while custom software is taxed at 6% — an unusual split for a state with an otherwise flat rate.
B2B SaaS buyers can allocate tax based on where software is actually used, reducing Maryland liability for multi-state usage.
Exemptions & resale certificates
Resale certificates
Maryland accepts its official Form STE-5 (Resale Certificate) plus the SST Uniform Exemption Certificate. Certificates cover all qualifying transactions and don't expire unless the buyer's business changes or registration is revoked.
Seller liability
Sellers who accept certificates in good faith are protected from liability if the certificate proves invalid. The Comptroller may still audit the exemption.
Common exemptions
- Resale / wholesale — exempt with valid certificate
- Manufacturing — direct-use equipment and materials exempt
- Agriculture — farm equipment and inputs exempt
- Nonprofits / religious organizations — must apply for exemption
- Government — exempt (federal, state, local)
Maryland does not currently offer direct pay permits.
Your next steps for Maryland compliance
Maryland's 2025 tax changes created real urgency for businesses selling software, SaaS, and tech services. Uncollected taxes and the 25% penalty can quickly exceed your profit margins on Maryland sales.
- Approaching nexus thresholds? Register by the first of the month following when you hit $100,000 or 200 transactions.
- Selling SaaS or digital services? Make sure your systems can handle the dual-rate structure and prepare for MPU certificate requests.
- Have past exposure? Maryland's VDA caps lookback at 3 years and eliminates penalties.
- Already registered? Review your product classifications — custom software lost its exemption in July 2025.
