Maryland's July 1, 2025 IT services tax — what changed for my SaaS company?

Maryland created a new 3% sales tax on certain IT services and software publishing services effective July 1, 2025, while keeping the existing 6% rate on digital products. The 3% rate applies to specifically-enumerated IT services — including software publishing, computer system design, data processing, and certain consulting/support services. The 6% rate still applies to digital products including SaaS when sold to individuals. The two rates can apply to different parts of the same transaction depending on what's actually being delivered.

The dual treatment turns on customer type and product characterization. SaaS sold to individuals (B2C) is generally taxed at 6% as a digital product. SaaS sold to businesses (B2B) may shift into the 3% IT services bucket if the arrangement is more service-like (custom configuration, ongoing system support, dedicated implementation) than product-like (off-the-shelf subscription to a hosted application). Pure subscription access to a standard SaaS application sold B2B typically stays at 6%; bundled IT consulting or custom development moves to 3%.

If you sell SaaS into Maryland and exceed the $100k economic nexus threshold (Maryland's economic-nexus test is $100k revenue OR 200 transactions), register through Maryland Tax Connect. The state's invoicing requirement is detailed: tax must be itemized by rate. If your product mix includes pure SaaS plus implementation services, the invoice must split the tax application — 6% on the SaaS portion, 3% on the IT-services portion. Use Maryland's IT services classification list (published by the Comptroller) to validate which services fall under the 3% category.

Maryland's Comptroller has stated it will audit IT-services classifications because the 3% vs 6% boundary creates incentive to misclassify. Keep contemporaneous documentation showing how you classified each customer's purchase: standard subscription vs custom implementation, B2B vs B2C, software product vs IT service. Maryland's enforcement focus will be on businesses that classified everything as 3% (the lower rate) or that didn't separately track IT services revenue. Both rates require Maryland sales tax registration and remittance.