Avalara Taxrates > Blog > Sales Tax News > Maryland, Digital Goods, Internet Sales Tax and Services - Avalara

Maryland, Digital Goods, Internet Sales Tax and Services

  • Mar 13, 2012 | Susan McLain

UPDATE: March 16, 2012. According to Tax Analysts, Senate Bill 523 was approved by the Senate and sent to the House. SB 523 incorporated language from SB 152 regarding affiliates and nexus, but deleted the sales tax on digital downloads portion.

Maryland is trying to pack quite a bit into a single legislative period. Couched in his 2013 budget bill, Maryland Governor O'Malley covers Internet sales taxation, digital goods taxation, income taxes, pensions, school funding and much, much more. For our purposes, we are going to focus on Senate Bill 152 (SB 152), the “Budget Reconciliation and Financing Act of 2012,” which has a companion bill in the House (House Bill 87), and House Bill 1051 (HB 1051) “Sales and Use Tax – Services.”

Digital Goods Taxation

Maryland SB 152 does indeed modify the law to add sales tax obligations on digital goods.  The acquisition of a “…digital product in a sale” qualifies as a taxable sale. Digital products include music, audio books, audio greeting cards, ring tones (or other digitized sound files), images and online newspaper, magazines, periodicals, weblogs, chat rooms “…or other similar product that is transferred electronically.”

Internet Sales Tax

The Budget Reconciliation bill also includes verbiage that clearly defines an affiliate as a relationship that creates nexus for an out-of-state seller. According to the bill, a seller who has entered into “…an agreement with a resident of the state under which the resident, for a commission or other consideration, directly or indirectly refers potential customers to the seller, whether by a link on an internet web site, or otherwise,” creates a relationship of having an agent within the state. Having an agent within the state creates a physical presence for the online retailer and therefore, a sales and use tax collection obligation.


Maryland House Bill 1051 (HB 1051) “Sales and Use Tax – Services” broadens the taxable services listed for the state of Maryland. The Act is “For the purpose of altering the definition of ‘taxable service’ under the sales and use tax to impose the tax on certain services.” Taxable services listed in the Act include:

  • Cable television
  • Motor vehicle maintenance
  • Road service and towing
  • Motor vehicle painting, rustproofing and undercoating
  • Barber or beauty services
  • Tanning and massage
  • Tax preparation
  • Dating or escorts
  • Exterminating
  • Photography and art
  • Dieting programs
  • Employment Agencies and Temporary Help
  • Management Consulting

This is only a partial list of services that are included in the bill. For a complete list, check out the bill itself (it’s only four pages long, but two of those pages are the listed services).

Get Free Tax Rate Tables

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Susan McLain
Avalara Author Susan McLain
Susan McLain began her career as a technical writer in technology industries such as satellite networking and medical devices. Her skills encompass technical and marketing writing, usability engineering, verification and validation testing and protocol writing, requirements development, business analysis, technical illustration/graphic design and marketing. She has owned her own business providing service to small to medium sized business and in other positions, she has been in project management, documentation and marketing. She is currently the content specialist for Avalara helping to “make sales tax less taxing.”