Is SaaS Taxable in Maryland in 2026?
Yes. In Maryland, SaaS (software as a service) is considered a digital product, which means that most B2C and B2B sales are taxed. As of July 1, 2025, B2B transactions are taxed at a reduced rate of 3%.
| SaaS | |
|---|---|
| Digital Goods | |
| Confused? | Talk to us -> |
| Sales | $100,000 |
|---|---|
| Transactions | 200 |
| Physical? |
| Maryland | 6.00% |
|---|---|
| Average Total Rate | 6.00% |
| Local Rates Apply |
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The current tax rate for SaaS in Maryland is 6%. There are no additional local or municipal taxes in Maryland, so the amount you’re required to collect does not vary based on where in the state a customer is located.
SaaS providers that have nexus in Maryland must collect and remit sales tax on taxable sales (we’ll discuss nexus in more detail later in this article).
No matter the size of your company or the type of software you sell, you must understand SaaS taxability in Maryland to maintain compliance. If you don't comply with the state's taxation rules, you could face significant fines and penalties. Failing to properly address tax obligations could also result in audits and reputational damage that could affect your business operations.
SaaS taxation rules in Maryland
In 2021, Maryland enacted a law that allows the government to collect sales taxes on certain SaaS products and digital goods when sold to consumers.
In Maryland, SaaS is considered a digital good, which is why it's taxed. According to Maryland's tax laws, a digital product is any item that can be purchased electronically. Previously, custom commercial software and enterprise software did not not need to be taxed. However, in 2025, Maryland implemented a reduced rate of 3% on B2B SaaS transactions.
Companies that have nexus in Maryland are required to collect and remit tax on taxable sales. There are two types of nexus: physical and economic.
A company has physical nexus in Maryland if it has a physical presence in the state — such as an office, inventory, or employees.
A company has economic nexus in Maryland if its gross revenue is at least $100,000 or if it conducts at least 200 separate transactions in the state during a calendar year.
When you establish nexus in Maryland, you must start collecting taxes immediately.
Exemptions and exceptions
There are several exemptions and exceptions. For example, some organizations and associations are exempted from paying sales taxes in Maryland, including:
- Religious and educational organizations.
- Nonprofit charitable companies.
- Nonprofit cemetery companies.
- Government agencies.
- Volunteer rescue squads and fire companies.
- Credit unions.
Example: How local tax rates may apply
Let's say that your business provides customers with an application for managing documents or photos like Dropbox. In this situation, customers would need to buy a monthly or annual subscription, which means that they don't gain full ownership of a product. If a customer is an individual, the subscription will be taxed at a rate of 6%. If the customer is another business, the subscription will be taxed at a rate of 3%.
For B2C transactions, no matter where the customer lives in Maryland, the tax rate will always be 6%. Local sales taxes aren't collected by city or county governments, which makes it relatively easy to calculate how much you need to collect from customers (many states have varying local and municipal taxes in addition to a state tax).
Additional resources for staying compliant
You can find the most recent tax rates and rulings in Maryland by accessing the Comptroller's website. They have a specific page where they post any changes that occur during the year.
The bottom line
Maryland requires most SaaS providers and other sellers of digital goods to collect sales taxes on sales made to individuals. And as of July 1, 2025, B2B transactions are no longer exempt and instead reduced to 3%. To avoid paying high penalties and fees, remain compliant with the state's most recent tax laws.
The Maryland Comptroller's website is a useful resource that can help you keep track of any changes that might apply to your company. If you're seeking efficiency with compliance, consider using powerful tax management software like Accounly.
