Comptroller’s Office issues guidance to help businesses brace for 3% ‘tech tax’

Comptroller Brooke Lierman (D) issued guidance Wednesday to help businesses preparing for a 3% tax set to take effect next month on the sale and use of several informational technology services.

“As we implement the new tax changes from this year’s General Assembly session, my team and I are focused on ensuring that business owners have the information and guidance they need to collect and remit the tax as simply as possible,” Lierman said in a written statement.

Sometimes referred to as the “tech tax,” the 3% tax on IT services is a result of the General Assembly’s efforts this past session to raise revenue amid a $3 billion state budget deficit. It is projected to raise about $500 million as part of $1.6 billion in new taxes and fees approved for fiscal 2026.

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To help businesses prepare for the tax hike, the Comptroller’s Office issued a “technical bulletin” Wednesday explaining the ins and outs of the sales tax, and which IT programs will be affected. A lot, according to the bulletin: cloud storage, data entry, data processing, media streaming data storage and technical support, telephone-based recorded information services, cryptocurrency mining, news and press clipping services, media archives such as for film and music, computer software design services, and dozens more.

The tax passed over the objections of Republican lawmakers and business owners who argued that it will drive IT businesses away from Maryland, even as Gov. Wes Moore (D) says he’s trying bring more businesses into the state. Even some Democrats were skeptical: Del. Brian M. Crosby (D-St. Mary’s) made waves when he announced on the House floor that the specter of the tax was the deciding factor to move his small business, which would have been subject to the tax, out of Maryland and into Virginia.

Ultimately, the tax, originally proposed as a business-to-business tax, was expanded to include IT sales to consumers as well, and passed. The tax does not apply to sales to tax-exempt organizations, including government agencies, and to businesses in the University of Maryland’s Discovery District in Prince George’s County.

The Comptroller’s office has also submitted emergency regulations to implement the 3% IT tax, which are under final review by the Office of the Attorney General.