Background
On April 1, 2025, the Maryland House of Delegates refused to concur with amendments made to HB 352 by the Maryland Senate and a conference committee has been appointed to resolve differences between the two versions of HB 352. HB 352 is the budget bill and most pertinently would enact a 3% tax on a significant swath of technological services under both versions of HB 352. Once approved, it is likely to be signed by Governor Wes Moore.
The Tax
The operative section of the bill, HB 352, would amend § 11-101(m) of the Tax-Gen. Article by adding several technology related services to the list of those that are taxable. Such services would include data or information technology services, described under the North American Industrial Classification System (“NAICS”) sectors 518, 519, or 5415; system software or application software publishing services described under NAICS sector 5132; and the licensing of media or software rights and other intellectual property. This latter category includes a host of media or software rights, such as production and distribution of computer software protected by copyright; intellectual property, including those that are protected by trademark or copyright; sporting event broadcasts and other media rights; television program broadcasts; distribution of specialty programming content; and syndicated media content.
The proposed legislation would tax such newly designated taxable services at a rate of 3%, with the caveat that if the higher 6% rate is potentially applicable to a service, it would be taxed at the higher rate (presumably because the service meets multiple definitions of otherwise enumerated taxable services).
The scope of the services taxable under these NAICS classifications include:
- Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services (NAICS 518)
- Web Search Portals, Libraries, Archives, and Other Information Service (NAICS 519)
- Computer Systems Design and Related Services (NAICS 5415)
- Software Publishers (NAICS 5132)
Additionally, the tax would apply to a wide array of media and intellectual property licensing transactions.
Forvis Mazars Insight: The use of NAICS codes as taxable classifications will be helpful, but there may be significant confusion as to the last category as to what kinds of transactions are taxable. Additionally, controversy may arise as to whether services fall into the newly created categories or are taxable under other definitions of taxable services.
How Forvis Mazars Can Help
Forvis Mazars will be monitoring the legislation closely to see if any changes are added in the Maryland Senate and update you accordingly as the bill moves through the legislative process and if and when it becomes law. We can also help you consider which categories the services you sell fall into and whether the higher rate might apply to those services.