Maryland Expands Taxability of Digital Goods

March 12, 2021

Electronically delivered canned or commercial off-the-shelf (“COTS”) software and software as a service (“SaaS”) will be taxable in Maryland beginning March 14, 2021. The addition of these products to the list of digital goods subject to Maryland’s 6% sales and use tax was announced by the state’s Comptroller as part of recently issued guidance in regard to a statutory expansion of HB 932.

Taxpayers making sales of taxable digital products to Maryland customers need to immediately update accounting systems to begin collecting sales tax on these transactions by March 14, 2021.

Purpose of the New Guidance

Maryland’s Comptroller has issued the new guidance to help taxpayers more easily apply the expanded sales and use tax requirements to the sale of digital goods. The guidance also clarifies available sales tax exclusions and exemptions, explains the application of the tax to marketplace facilitators and remote sellers, and describes how to make sourcing decisions.

Understanding Taxable Digital Products

On February 12, 2021, HB 932 went into effect, making a wide range of digital products subject to Maryland’s 6% sales and use tax, including digital code; streaming; music; ring tones; electronic and audio books; electronically transferred movies, music videos, news, entertainment programs, live events, video or electronic games; e-mailed audio and video greeting cards, prerecorded or live music or performances and speeches; and online newspapers and magazines.

Other products that are taxable if obtained or delivered electronically include mailing lists, medical records; design files and templates; venues that permit users to communicate electronically in real time; virtual items used in video or online gaming; and subscriptions or licenses to use software applications.

Applying Exemptions and Exclusions

The Comptroller’s guidance explains that digital goods exempt or excluded from the state’s sales or use tax include custom software and computer programs for resale.

Sales and use tax also does not apply to a variety of electronic images or signals intended for television viewers. Some digital products used for research and development are also exempt.

Other exemptions and exclusions are available however careful interpretation of the law is required. For example, the guidance explains that even if the buyer has already paid sales tax on the purchases to another state before entering Maryland, they still are responsible to pay use tax if using the digital goods in Maryland.

Impact on Remote Sellers and Marketplace Facilitators

Remote sellers and marketplace facilitators also are subject to Maryland’s digital goods tax. Marketplace facilitators are now responsible for collecting and remitting sales tax to Maryland for digital goods electronically delivered within the state. Remote sellers who meet the state’s economic nexus thresholds are subject to the same sales tax compliance responsibilities. Maryland’s economic thresholds are $100,000 in sales or 200 transactions during the previous or current calendar year.

Correctly complying with Maryland’s expanded tax laws on digital goods is complex. If you have questions or need guidance navigating these new sales tax obligations, contact Cherry Bekaert’s sales tax team at, or email Lauren Stinson at