Avalara > Blog > Sales and Use Tax > Maryland could soon tax digital products and digital advertising

Maryland could soon tax digital products and digital advertising

  • Mar 24, 2020 | Gail Cole

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Update 2.12.2021: The Maryland Legislature has overriden Gov. Hogan's veto of HB 732.

5.13.2020: House Bills 732 and 932 were approved but vetoed by Governor Hogan: "These misguided bills would raise taxes and fees on Marylanders at a time when many are already out of work and financially struggling. With our state in the midst of a global pandemic and economic crash, and just beginning on our road to recovery, it would be unconscionable to raise taxes and fees now."

Shortly after killing a bill that sought to tax many services and reduce the general sales tax rate, Maryland lawmakers agreed to expand sales and use tax to certain digital products and digital advertising. They may also tax gross revenues from digital advertising.

Tax on digital codes and products

House Bill 932 taxes the retail sale and use of digital codes and digital products, starting July 1, 2020.

A “digital code” is a code (obtained by any means, including a tangible card or email) that “provides a buyer with a right to obtain one or more digital products.” A gift certificate or gift card with a monetary value that may be redeemable for anything other than a digital product is not included in the definition of digital code.

A “digital product” is a product obtained electronically or delivered by means other than tangible storage media (i.e., via digital, electrical, electromagnetic, magnetic, optical, wireless, or similar technology). Digital products include:

  • Digitized sound files (e.g., ring tones)
  • Ebooks
  • Electronically transferred images (e.g., entertainment programs, movies, music videos, video greeting cards, etc.)
  • Electronically transferred magazines, newspapers, periodicals, and similar products
  • Electronically transferred sound files (e.g., audio greeting cards sent by email, and prerecorded or live music, performances, readings, speeches, etc.)

A retail sale of a digital code or product is presumed to be made in the state where the buyer’s tax address is located. The rate of tax owed is based on the buyer’s “primary use location,” meaning the street address where the buyer’s use of the digital product will primarily occur. Additional details are provided in HB 932.

Tax on digital advertising

Another bill, House Bill 732, would tax annual gross revenues derived from certain digital advertising services.

“Digital advertising services” means advertisement services on a digital interface. This includes

  • Banner advertising 
  • Search engine advertising
  • Interstitial advertising
  • Other comparable advertising services

The digital advertising gross revenues tax rates are as follows:

  • 2.5% of the assessable base for a person with global annual gross revenues of $100 million through $1 billion;
  • 5% of the assessable base for a person with global annual gross revenues of $1,000,000,001 through $5 billion;
  • 7.5% of the assessable base for a person with global annual gross revenues of $5,000,000,001 through $15 billion; and
  • 10% of the assessable base for a person with global annual gross revenues exceeding $15 billion.

In addition to the gross receipts tax on digital advertising, the measure would also tax the sale and use of electronic smoking (vaping) devices and increase taxes on cigarettes and other tobacco products. More details can be found in HB 732.

HB 932 is now on Governor Larry Hogan’s desk. When he’ll have time to review it is unclear given the situation with the new coronavirus (COVID-19). See our Coronavirus tax relief roundup for the latest tax news related to the pandemic.


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
Gail Cole
Avalara Author Gail Cole
Gail Cole is a Senior Writer at Avalara. She’s on a mission to uncover unusual tax facts and make complex laws and legislation more digestible for accounting and business professionals.