June 2, 2025
This article is made available through Lumsden McCormick’s membership in the BDO Alliance USA. View the complete article on BDO.com.
Article Summary
Maryland’s fiscal 2026 budget introduces a 3% sales tax on data and IT services, along with new tax brackets and increased rates for high-income earners. The budget also raises taxes on cannabis, sports betting, and vehicle excise, while proposals to reduce corporate tax rates and repeal inheritance tax were not included.
Budget Highlights
- Tech Tax Introduction
- Effective July 1, 2025, a 3% sales tax on data and information technology services.
- Applies to services like cloud storage, web hosting, video streaming support, and IT consulting.
- Pass-Through Entities (PTE) Updates
- Changes in tax computation for resident and nonresident members starting after December 31, 2025.
- Individual Income Tax Changes
- New tax brackets for high-income earners.
- Increased tax rates for individuals earning over $500,000.
- Capital gains surtax for incomes over $350,000.
- Phase-out of itemized deductions for incomes over $200,000.
- Miscellaneous Tax Changes
- Increased sales tax on cannabis from 9% to 12%.
- Higher taxes on sports betting, vehicle excise, and car rentals.
- Failed Provisions
- Proposals to reduce corporate tax rate and repeal inheritance tax were not included.
- Guidance
- Comptroller’s Office to provide guidance and educational webcasts for compliance.
This article is made available through Lumsden McCormick’s membership in the BDO Alliance USA. Written by Elil Shunmugavel Arasu, Principal, State & Local Tax; Melissa J-L Myers, Managing Director, State & Local Tax; and Emilie Burnette, Manager, State & Local Tax. Copyright © 2025 BDO USA, LLP. All rights reserved. www.bdo.com
