Maryland’s New 3 Percent Tax Will Chill the State’s Emerging Tech Sector
Maryland is facing a $3 billion budget gap that it hopes to close with a new “tech tax.” The first-in-the-nation tax, which took effect on Tuesday as part of the state’s budget bill, imposes a 3 percent levy on “the sale of many informational technology services,” reports Maryland Matters. The tax could generate approximately $747 million in tax revenue by FY 2030, but critics warn that the cost will outweigh any fiscal benefits.Â
The new tax affects a range of IT services, including cloud storage and website hosting, data processing systems, software design, and niche services such as cryptocurrency mining. Under the new law, both Big Tech companies and small businesses will be affected. Businesses will also be responsible for discerning what’s taxable and what’s not. “Each service a vendor provides must be evaluated individually to determine its taxability,” according to the guidance issued by the comptroller’s office. The law carves out exemptions for emerging firms in the University of Maryland, College Park’s Discovery District, tax-exempt organizations (including government agencies), and companies working with quantum computing developers.Â
While the measure will hurt all tech companies in the state, it will have a demonstrable impact on startups (which often operate on slim or negative profit margins) and smaller firms. “For the industry overall, this tax will raise costs and add confusion, especially for small firms that just don’t have the resources to adapt quickly,” Darren Clark, owner of Clark Computer Services, a Maryland IT service provider, told The Frederick News Post. “Some will have to raise prices or absor
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