Maryland is facing a $3 billion budget gap and is considering a host of tax hikes. On March 24, 2025, the Maryland House of Representatives Committee on Appropriations amended the state’s budget bill, House Bill 352 (cross-filed with Senate Bill 321) to include, among other things, a proposal to expand the sales and use tax base “to the licensing of media or software rights and other intellectual property,” certain “data or information technology service[s]” and “software or application software publishing service[s].”
If enacted, Maryland would become the first state to impose a retail sales and use tax on media rights in such a broad manner.[1] In 2021, Maryland expanded its tax to include streaming services. Now, under this proposal, Maryland would expand its tax to include the content licensed by the streaming services. A little bit of silver lining stems from the fact that this tax expansion is only at 3%, which is half of Maryland’s general sales tax rate. These changes – if enacted – take effect July 1, 2025.
Background
The Maryland General Assembly has considered a number of business tax proposals to raise revenues to close the state’s significant budget gap. Assuming House Bill 352, as amended, is approved by the House, the legislation and its Senate companion will be finalized in conference committee where negotiations may result in subsequent amendments before the final version of the budget bill must be passed no later than Monday, April 7, 2025.
Media Rights and Other Intellectual Property
Examples of taxable media rights subject to sales and use tax in House Bill 352 include:
(i) software protected by copyright; licensing of rights to produce and distribute computer; (ii) licensing of rights to use intellectual property, including intellectual property protected by trademark or copyright; (iii) licensing of sporting event broadcast and other media rights; (iv) licensing of rights to broadcast television programs; (v) licensing of rights to broadcast television programs; licensing of rights to distribute specialty programming content; and (vi) licensing of rights to syndicated media content.
At this point, it is unclear how expansive “other intellectual property” will be interpreted by the Comptroller.
Data Processing, Information Services, and Software Publishing
House Bill 352 would also tax data processing and information technology services, including information services, as described in the 2022 Edition of the North American Industry Classification System (NAICS) sectors 518, 519, or 5415. Similarly, software publishing as described in NAICS sector 5132 would be subject to sales and use tax. This base expansion follows Maryland’s tax on digital products, including SaaS, that took effect on March 14, 2021.
[1] Some states that impose broad gross receipts taxes, like New Mexico and Hawaii, tax some forms of intellectual property transactions, but not to the extent contemplated by House Bill 352, as amended.