The Maryland House of Delegates recently introduced new legislation, Maryland House Bill 1628, that would expand the Maryland sales and use tax base to include almost all services, as well as reduce the tax rate from 6% to 5%.

Amounts charged for services are currently generally exempt from the sales tax, with some exceptions specified by law. The proposed legislation would define “taxable service” as “any activity engaged in for a buyer for consideration,” which means that the sales tax would apply to most professional services, including legal, accounting, engineering, and financial services.

However, the legislation would exclude the following services:

- Educational services;

- Healthcare or social assistance services;

- Services provided by a religious organization;

- Grant-making or giving services;

- Services provided by a social advocacy organization;

- Services provided by a civic or social organization; and

- Services provided by a business, professional, labor, or political association. 

What Does CohnReznick Think?

This bill was introduced to reduce Maryland’s sales tax rate and to broaden the sales tax base to include professional services in an effort to help pay for the Kirwan Commission’s recommended revisions to Maryland’s public education system. Several professional organizations oppose the bill.

If enacted, the legislation would take effect Jan. 1, 2021.

Contact

Corey Rosenthal, JD, Principal, State and Local Tax Services Leader

646.625.5729

_{Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.}