June 10, 2023

MD 6% Digital Tax Begins Now

Digital Tax

Maryland’s new 6% sales and use tax on digital products becomes effective this month, reports Askey, Askey & Associates, CPA, LLC. Customers can expect to start seeing the added cost on a bevy of electronically delivered products and services. Businesses that provide digital products will need to carefully review the new requirements to evaluate their sales tax collection and filing requirements.

Everything from ring tones to streaming musicals will now include the tax when they’re delivered to a Maryland taxpayer. A partial list of impacted products include:

  • E-books
  • Online newspapers, magazines, periodicals, or any other publication
  • Subscriptions to streaming services as well as periodicals delivered digitally.
  • A digital download or stream of a motion picture, music video, news or entertainment program, live event, sporting event, tutorial, etc.
  • A digitized sound file that may be downloaded onto a device and may be used to alert the user to a communication or information
  • A sale, subscription, or license to access content online
  • A sale, subscription or license to use a software application
  • Access to a chat room, discussion, weblog, or any other venue that permits users to communicate electronically in real time
  • An online class, instruction, or similar product
  • Access to or use of video or online games
  • Access to or use of virtual items – such as skins, renders, and in-app purchases – purchased for use in a video or online game
  • Audio or video greeting cards sent by email, text, or any other electronic means
  • Customer lists, mailing lists, medical records, and similar products
  • Design files, models, and templates, such as 3D design files, 3D models, CNC templates, and virtual/alternate reality templates
  • Photographs, artwork, illustrations, graphics, and similar products
  • Prerecorded or live music
  • Prerecorded or live performances
  • Prerecorded or live audio books or other written materials
  • Prerecorded or live speeches including commentaries, dissertations, and lectures

Newspapers, magazines, and other digital products which are obtained free are not subject to the new tax.

Digital codes, which provide the buyer with a right to obtain one or more digital products, are also subject to the tax no matter how the digital code is obtained, meaning, even if the code was not obtained in a digital manner if it is used to access a digital service or product it will be taxed in Maryland.

Digital services are also impacted by the new tax and fabrication of a digital product is taxable in the same manner the production of tangible personal property is taxed. But there are fewer exemptions.

Except in narrow cases of custom and highly creative software creation, commercial “off the shelf software” and the sale of software services are subject to the tax.

Digital services also include standard and ongoing activities of advertising agencies, educational organizations including nonprofits, the entertainment industry, and newspaper and photography sales.

To learn more about how the new tax will impact you or your business contact Askey, Askey & Associates, CPA, LLC. They have two full-service offices located in Leonardtown, MD, at 23507 Hollywood Road, P.O. Box 662, Leonardtown, MD 20650, phone: (301) 475-5671; and in Laplata, MD, at 105 Centennial Street, Suite D, La Plata, MD 20646, phone: (301) 934-5780.

For more about Askey, Askey & Associates, CPA, LLC, visit their Leader Member Page, Facebook or LinkedIn.

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