New Taxes Target Data, Software, Services
Bellevue, WA (November 2025) –Many businesses in the Old Line State are paying incorrect taxes.
Started July 1, 2025, Maryland’s new, 3-percent sales and use tax applies to certain data, software and IT products and services – including Software as a Service (SaaS). These are new taxes on previously untaxed products and services.
In 2020, Maryland became one of the first states in the nation to begin taxing software services, aiming to curtail the state’s budget shortfall. Now, with a potential $3 billion budget deficit, the state is again looking for solutions to fill the gap.
“Medium and large businesses will be affected most by Maryland’s new taxes,” said Jeff Heyel, CMI, CPA, Vice President of Tax for recovery audit firm CPRS. “It’s important for businesses to not only get ready for this change, but to have an audit plan in place in 2026.”
The Comptroller of Maryland (COM) has been sending Technical Bulletins to clarify these new taxes. Technical Bulletin #56 provides a Q&A on the new tax law, which “expands the definition of services subject to the sales and use tax to include data services, information technology services, system software publishing services, and application software publishing services.”
Heyel recommends businesses be concerned about several areas, including:
- Multiple Points of Use Determinations
Maryland does offer a Multiple Points of Use (MPU) exemption for these new taxes, allowing companies that purchase these newly taxable services in multiple states to only pay tax on the portion used in Maryland.
“With Maryland’s evolving tax policies, businesses need to stay proactive in understanding and applying MPU exemptions correctly,” Heyel said. “As such, a reevaluation of MPU exemptions is recommended.” - Sourcing will become an Issue
“The location you use to determine if these technology services are taxable in Maryland is crucial,” Heyel said. “It will be important for taxpayers to determine the correct sourcing locations for services that become subject to the new sales and use tax.” - Private-Letter Rulings (PLR) may be required
“Private Letter Rulings are an important tool companies should use,” Heyel said. “The guidance PLRs provide is binding, so if a company gets audited, the Comptroller of Maryland (COM) auditor has to follow PLR guidance.”
Businesses concerned about tax impacts to their bottom line do have options for offsetting the tax increases, Heyel said:
- “Consider doing a Reverse Sales & Use Tax Audit. These backward-looking audits uncover overpayments and secure meaningful, defensible recoveries. Reverse Sales & Use Tax Audits take full advantage of every exemption and exclusion available.”
- “Conduct an AP Recovery Audit. Recovery audits dig deep to uncover systemic errors and recover lost profits that traditional ERP systems often miss. CPRS facilitates efficient, AI-enhanced audit testing that provides detailed client reporting, metrics, and data security in a unified private cloud environment.”
- “Catch invoice errors before they occur. CPRS Active Invoice Review combines an AI-enhanced, proprietary Pearl™ technology suite with carefully selected and rigorously trained auditors to validate invoices in real-time.”
- “Consider doing a Reverse Sales & Use Tax Audit. These backward-looking audits uncover overpayments and secure meaningful, defensible recoveries. Reverse Sales & Use Tax Audits take full advantage of every exemption and exclusion available.”
CPRS recovers billions in overpaid taxes, unrecovered incentives, and lost profits for the world’s largest companies while protecting vendor and government relationships at the national, state, and local levels.
