The Enactment of New Sales Tax on Digital Goods and Services in Maryland

Apr 12, 2021, witnessed a surprising change in the sales tax laws in Maryland. The enactment of a new sales tax on digital goods and services was passed in Maryland that surprised consumers and retailers by surprise. The Maryland General Assembly released S.B. 787 that bought in new tax rules for digital goods and services.

Consumers and sellers were surprised by the new laws levied on digital goods and had to accept them in order to comply with everything legally. According to the latest news, they are expected to get familiar with the latest laws and analyze if and how they should deal. Although the laws have been documented for over a year, the sudden crash of the same has been a halt for many.

Products Included Under the Revised Sales Tax Laws:

Digital Goods Include:

• Digital newspapers, magazines, and other publications

• Ringtones

• Subscriptions for online content

• Downloads of online educational materials, sporting events, and movies

• Online classes and games

• Audio and video content shared online, including invitations

• Designed models and files

• E-books

• Digital artwork and photographs

• Subscribing or selling online software

• Prerecorded music, speeches, and performances

Anything that is present online and has a digital presence can be counted under the sales tax laws.

Read Also: Difference Between Civil Litigation Attorney and Tax Attorney

Impact of Revised Tax Laws on Consumers:

The change in sales tax laws is directly hitting the consumers. The prices of digital goods increased, and finally, the consumer was burdened with the new pricing. The sellers were entitled to pay the newly formed taxes but somehow got out of it by sharing them with the consumers. Besides all the pressure financially, it affected the buying power of the consumers. The more pressurized they felt about the prices and taxes, the more they lowered their need for such products. For instance, increased demand for online movie subscriptions drove more customers initially. Their demand decreased with time as and when the taxes got added with the total cost.

Busting Sales Tax Myths:

Talking to the best Maryland Sales and Use Tax Audit Attorney clarifies some myths regarding the revised laws.

• Electronic use in the process of creating a standard product doesn't count under the laws. People believed that any process involving digital procedures would be counted under the new tax laws. Perhaps, the reality is that any process that involves digital steps would not be considered under the tax laws if the resultant product is non-digital. Anything that results in the production of a digital product or service would be counted under the new rules.

• The public is head over heels to gather as much information as possible about the new laws. Maryland passed a Business Tax Tip #29 that includes everything that the public wishes to know. Every issued statement is mentioned in the tax tip and clarifies all the myths and rumors. The rules are apparently applied to all types of businesses and non-profit organizations.

• After releasing the revised tax laws, lots of rumors and misunderstandings surfaced in Maryland. With the help and assistance of Maryland legal services, people started understanding the actual impact of the laws on their tax filing. Who better than a certified professional to clear your doubts with?

How did the Revised Tax Laws Get Passed in the First Place?

The appeal to passing new sales tax laws was first documented and introduced in March 2020, which was suppressed initially. Again, the rules came into the discussion on July 1, 2020, which was then voted against by Governor Larry Hogan along with the tax advertising laws. Because of the pandemic, the Governor was against the whole plan. He did not want to pressure the Marylanders with the increased sales tax, especially when they were at their low financially and economically.

The Governor’s plea to dismiss the subject was overridden by the legislature in Feb 2021, and the law was finally passed in March.

The business owners in Maryland, along with the customers, were surprised by the enactment of the laws. This resulted in less demand for digital goods and services. Already, IRS tax issues in Bethesda, MD, are strict and expect fine follow-up by the public. Having a certified tax attorney by your side can be a great help.

Consider dealing with the best tax attorneys in MD and understand the exact enactments for your convenience.