Digital Goods Now Taxable in Maryland

by Jennifer Dunn March 15, 2021


A number of new “digital goods” become taxable in Maryland on Sunday, March 14th, 2021. 

Where before retailers were not required to charge sales tax on streaming rentals or eBooks purchased in the state of Maryland, starting Sunday that will no longer be the case. 

The enactment of HB 932 makes the following digital products now taxable in Maryland:

  • Streaming digital products (rented or purchased movies, TV shows, video games, etc.)
  • Digital codes that provide the buyer with the right to obtain a digital product
  • Music
  • Ringtones
  • eBooks and audiobooks
  • Online newspapers
  • Software as a Service

This means that if you sell any of the digital goods to a buyer who takes possession of the item in Maryland, then you are required to begin collecting sales tax on Maryland digital goods starting Sunday, March 14th.

Maryland’s new law is also careful to stay that the definition of “digital goods” is not limited to the above. If you have any question about whether the products you are selling in Maryland constitute “digital goods,” we recommend contacting the Comptroller of Maryland for clarification. The state has also issued Business Tax Tip #29 as guidance for digital goods sellers. 

Why are digital goods taxable in Maryland now? 

This change has been a long time coming. The 2014  Maryland Remote Sales Tax Loss Study stated, “As digital goods are not currently taxable in Maryland, [the] expansion of the digital goods market, largely at the expense of sales of tangible personal property, is causing further erosion of the State’s sales tax base.” 

Last year, the Maryland legislature passed both HB 732 and HB 932 as a measure to enlarge the state’s tax base. 

HB 732 makes Maryland the first state to make digital advertising taxable (on high-volume digital advertising users). HB 932 makes digital products taxable. 

However, both bills were vetoed by Maryland Governor Larry Hogan. In a dramatic turn (at least for sales tax legislation) the Maryland legislature voted on February 12, 2021 to override both vetoes. Under Maryland law, a law goes into effect 30 days after a veto override. And that’s why we see this tax going into effect on such an odd date – March 14, 2021.

Do you sell digital products to buyers in Maryland?

With these new laws, Maryland becomes one of the 30+ states where digital products are now taxable

This is a big change for retailers, and the state has issued guidance in the form of Business Tax Tip #29 to help retailers determine how to charge sales tax on digital goods in Maryland. 

We also recommend that you be ready to explain these new charges to any Maryland based customers, who won’t be accustomed to seeing an extra charge on their digital goods purchase. 

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