Readers of this blog know that we regularly post about states which tax SaaS and digital products, because so many of our clients face these issues. Now, Maryland has enacted House Bill (HB) 932 that will subject Digital Products such as e-books, songs and movies along with electronically delivered software, including Software as a Service (“SaaS”) to sales and use taxation. The legislation becomes effective on March 14, 2021.
A Bit of History
Up until now Digital Products in Maryland were not subject to sales and use tax. Consequently, the sale of canned software was taxable only if delivered in tangible form.
Tax is imposed on retail sales, as defined by Maryland Law. However, HB 932 redefines retail sales to include the sale of certain digital products. A “digital product” is defined as a product that is obtained electronically by the buyer or delivered by means other than tangible storage media through the use of technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
More on the New House Bill
HB 932 has also broadened the sales and use tax to include sales to end-users of subscriptions to, streaming of, access to or the purchase of a digital code for receiving or accessing digital products. Other examples of digital products include videos, ringtones, audio greeting cards, video or electronic games, online newspapers, magazines and chat-room discussions and prerecorded or live music or performance – seemingly anything that’s digital and fun!
HB 932 addresses software where the sales of canned or commercial off-the-shelf software is a digital product and is taxable if obtained electronically by the buyer. It also states that SaaS is taxable.
For more details on HB 932, see MD Business Tax Tip #29, which was released by the Maryland Comptroller’s office.
What the Future Holds
If you have any questions about whether SaaS is taxable in states into which you sell, check out some of our other posts on the topic here and here. Stay tuned to our future Miles Consulting Group blogs for updates on other sales tax laws around the country. We are here to help with all of your multistate tax needs. Call us today!
