Maryland SaaS Taxability

AAFCPAs would like to make clients aware of new Maryland sales tax legislation, which effectively narrowed the definition of digital products and changed the sales taxability of Software as a Service (SaaS), effective July 1, 2022.

Background

In March 2021, Maryland’s Office of the Comptroller issued guidance on digital products and announced that SaaS would now be subject to the state’s sales tax. Pursuant to this requirement, remote and in-state sellers meeting nexus requirements were required to collect and remit sales tax on sales of SaaS.

However, on May 29, 2022 Maryland passed House Bill 791 (without the Governor’s signature), which ended the taxability of SaaS sold or licensed for commercial use in Maryland.  Keep in mind that, because the effective date of this new legislation is July 1, 2022, any sales of SaaS made between March 2021 and June 2022 would still have been subject to the sales tax.

AAFCPAs reminds clients that sales tax regulations are ever evolving. Taxability of SaaS varies state by state, with over a third of the states requiring sales tax collection on SaaS.

These changes are an important consideration in any tax forecasts or planning that includes state effective rate calculations.

If you have questions or need help managing your tax compliance, please contact Brian O’Hearn at bohearn@nullaafcpa.com, 774.512.4121; Kelly Zack, MST at kzack@nullaafcpa.com, 774.512.4001; or your AAFCPAs Partner.