The Ripple Effects Of Maryland’s 3% Service Tax On IT Services

Maryland’s new 3% tax on IT services—aimed at addressing a $3.3 billion budget shortfall—is drawing strong criticism from the tech sector and small businesses. Affecting key services such as cloud computing, cybersecurity, and software development, the tax raises concerns over higher operational costs, reduced innovation, and the potential exodus of businesses to neighbouring states with more favourable tax regimes. While proponents argue it modernizes the tax code and could generate $500 million annually for public services, critics warn it may hinder Maryland’s competitiveness as a tech hub and disproportionately impact small enterprises.