Moore Signs Maryland Fiscal 2026 Budget to Impose Tech Tax, Change PTE Rules, Increase Taxation of Top Earners

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

  1. 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.
  2. Pass-Through Entities (PTE) Updates
    • Changes in tax computation for resident and nonresident members starting after December 31, 2025.
  3. 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.
  4. Miscellaneous Tax Changes
    • Increased sales tax on cannabis from 9% to 12%.
    • Higher taxes on sports betting, vehicle excise, and car rentals.
  5. Failed Provisions
    • Proposals to reduce corporate tax rate and repeal inheritance tax were not included.
  6. 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

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