Maryland has previously introduced two important and troubling changes: tax on digital advertising and the expansion of its sales tax on digital products and services. As a result of a number of significant changes in both tax reforms, the Maryland Legislature passed the Bill 787.

  • SB 787 has modified the Maryland Digital Advertising Total Revenue Tax by: (1) by January 1, 2022. (2) Freeing digital advertising services to broadcast and news outlets and (3) prohibiting tax evasion.
  • SB 787 will also improve Maryland sales and use tax expansion on digital products by releasing a limited number of digital services, including Live (1) Live School Directive; (2) expanding the freedom of custom computer software; And (3) making various technical corrections.

Maryland Governor Larry Hogan is expected to sign or oppose the bill, which allows SB 787 to become law within 30 days.

Digital advertising tax

A.D. The new tax rate varies based on the taxpayer’s annual annual income, which ranges from 2.5% to 10% of the total annual revenue from digital advertising services in Maryland. The tax is effective from March 14, 2021 and is valid for tax years from or after January 1, 2021.

Digital Advertising Tax – SB 787 Amendments

SB 787 made three changes to the digital advertising tax. First, the digital advertising tax deadline has been delayed until January 1, 2022.

Second, Maryland has issued a new free license for domestic broadcasters. The tax does not apply to advertising services owned or represented by digital interfaces. Distribution component Or News media body. ” (Emphasis added). “Broadcast Legal Entity” means “the governing body of a broadcast television or radio station. A “news agency” means “an organization primarily engaged in the collection, reporting, or publishing of news, or news, current affairs, culture, or other public interest matters.” However, the “News Media component” does not necessarily include the third party content collector or republisher. The account does not explain many of the key features of these freedoms, for example:

  • When does a digital interface work on behalf of a broadcast or news media component?
  • How do you decide if someone is involved in a major broadcast or news business?
  • How do you determine if a legal entity is primarily a collector or publisher?

Third, Maryland prohibits taxpayers from transferring taxes to a customer in a “separate fee, additional fee or line item.” However, taxpayers are not prohibited from indirectly increasing the cost of advertising services to Maryland customers by considering digital advertising tax.

Sales of digital products sales tax

A.D. On February 12, 2021, the Maryland General Assembly abolished Governor Hogan Veto HB 932 and expanded sales and taxes for digital products and digital codes, beginning March 14, 2021. The bill describes “digital product” as “product.” Electronic, digital, magnetic, wireless, optical, electromagnetic or similar technology can be acquired electronically by the buyer or access other than the actual storage media. The term includes electronic music files, video files, e-books, newspapers and magazines, and video games.

The Maryland Treasury Supervisor has issued Business Tax Tip No. 29, which will confuse the new digital goods sales tax provisions of digital goods and services. Most of these items and services are listed in HB 932 but not many. The list of taxable items included in Tax Tip No. 29 includes the following

  • Digital downloads or videos, music videos, news and entertainment programs, live events, sports events, tutorials, etc.
  • Sales, subscriptions or licenses to use the software application;
  • Access to chat rooms, chats, weblogs or other places where users can communicate electronically instantly;
  • Online parts, instructions, or similar products;
  • Access or use of video or online games;
  • Pre-recorded or live lectures, including comments, lectures, and speeches; And
  • Software as a service.

The controller also stated that HB 932 does not apply to various products on digital products.

Sales of Digital Products Tax – SB 787 Amendments

In response to computerized instruction and services from the business community, SB 787 provides some exclusion from sales tax and has made other changes, including tax-

  1. Explaining that the tax applies to subscribing, accessing, receiving or releasing digital products;
  2. Certain school guidelines, continuing business education, nonprofits and electronic services;
  3. Release of applicable to certain custom software and related services, regardless of the method transmitted or access and the software’s customized, configured or modified conditions “to perform the functions required for the software to function as intended”;
  4. Adding digital codes to all digital product offerings; And
  5. Implement limited freedoms for digital products, such as temporary and independent sales, use in production activities or temporary storage in the state.

The General Assembly has set out a number of decisions regarding digital sales tax. The SB 787 does not change the Comptroller definition of sales tax on most computer software downloads and SAAS. However, during the debate, the legislative amendments were passed by Md. They stated that they intended to make “free software” free of custom software in Code Ann., Tax-General § 11-219 (b).

Next steps

Governor Hogan has 30 days to oppose, sign or allow the law to become law without his signature. It is expected that the vote, which is expected to become law within 30 days, will not be vetoed or signed. However, the amendment will take effect again on March 14, 2021 (the first day of the Digital Advertising Tax and Sales Tax Expansion).

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