The Maryland Comptroller’s Office has issued updated guidance on the sales and use taxation of digital products and digital code. This guidance aligns with recently enacted legislation that amended the definition of “digital product” to exclude:
- Certain products where the purchaser has a property interest
- Certain types of computer software
Key Updates and Clarifications
The update includes revisions and additional examples on the following topics:
Advertising
Clarification on the taxation rules applicable to digital advertising-related services.
Agricultural Exemption
Explanation on how agricultural exemptions apply to digital products.
Cloud Storage Services and Data Transfer Fees
Updated guidance on the treatment of cloud storage services and fees related to data transfers.
Production Activity
Clarifies how production activities intersect with digital products and associated exemptions.
Sale of Digital Advertising Space
Examples and clarifications provided for transactions involving the sale of digital advertising space.
Search Engine Optimization (SEO) Services
Details on whether SEO services fall within the scope of taxable digital products.
Video Conferencing Software Platforms
Clarifications on the taxability of subscriptions and services tied to video conferencing software.
Website Design and Development
Specific guidance on whether these services are considered taxable digital products.
Web Hosting Services
Clarification on how hosting services are treated under the updated tax rules.
Reference: Maryland Tax Tips No. 29, 07/01/2022 (released August 2022).
Frequently Asked Questions
What digital products are now excluded from Maryland sales and use tax?
Certain digital products are now excluded if the purchaser has a property interest or if the product is a specific type of computer software. This change was made to better define the scope of taxable digital goods.
Are SEO services considered taxable under the updated guidance?
No, the updated guidance clarifies that SEO (Search Engine Optimization) services are not considered taxable digital products in Maryland.
How are cloud storage and data transfer fees taxed?
The Comptroller’s Office has clarified that charges for cloud storage services and associated data transfer fees are subject to specific tax treatments, depending on how the service is delivered and billed.
Is website design and development taxable?
The update specifies that website design and development services are not considered taxable digital products, provided they do not involve transferring taxable digital code or products.
Are web hosting services subject to sales tax?
Yes, web hosting services may be subject to tax depending on the nature of the service and how it is provided, as clarified in the Comptroller’s updated guidance.