Detailed Maryland Development
On February 12, 2021, the Maryland Senate voted to join the House of Delegates in overriding the Governor’s veto of House Bill 932. This bill, entitled the 21st Century Economy Sales Tax Act, was passed by lawmakers back in March 2020. However, the bill was one of several pieces of legislation subsequently vetoed by Governor Hogan. House Bill 932 redefines the term “retail sale” to include the sale of certain digital products, thus subjecting such sales to Maryland sales tax. A “digital product” is defined as “a product that is obtained electronically by the buyer or delivered by means other than tangible storage media through the use of technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.” The bill sets forth certain types of digital products that generally follow definitions used in a number of states for audio and audio-visual products as well as e-books. A “digital product” also specifically includes ring tones, e-greeting cards and digital newspapers, magazines, and other media. In addition to taxing digital products, House Bill 932 expands the sales and use tax to sales to end users of subscriptions to, access to, streaming of, or the purchase of a digital code for receiving or accessing digital products. For sourcing purposes, the retail sale of a digital code or digital product is presumed to be sourced to the state in which the customer’s tax address is located. A specific hierarchy applies to determine a customer’s tax address. Sales and use tax does not apply to a sale of a digital product for use or consumption in research and development. The overall Act has an effective date of July 1, 2020. It is not clear how this effective date will be implemented given that the veto override occurred several months after this date. Please contact Sarika Bakshi at 703-286-8467 with questions on Maryland House Bill 932.
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