What is the taxation of digital services?
In Maryland, the taxation of digital services depends on the type of digital service being offered. Digital services are generally taxed in the same manner as other types of services. For example, services such as online instruction, web design, software development, and digital advertising services are taxed at the same rate as similar services provided in a tangible medium. Additionally, digital services such as electronic downloads, streaming content, and “software-as-a-service” are also taxed like tangible goods. In general, digital products that are taxable in Maryland must meet certain criteria, such as whether they are permanently transferred to the purchaser, whether the purchaser has exclusive ownership rights, and whether the purchaser has the right to sublicense the digital product. Maryland also has rules about when sales taxes must be remitted for digital products and services. For example, if a business charges for a digital product, such as an electronic book, and does not charge for the shipping, then the sales tax on the product must be remitted to the state. At the international level, there are a number of global tax initiatives in effect that could impact the taxation of digital services in Maryland. For instance, the Organisation for Economic Co-operation and Development (OECD) has released a package of tax standards that provide guidance on how digital services should be taxed across borders. Additionally, the United States has signed on to the Base Erosion and Profit Shifting (BEPS) initiative, which is a global effort to ensure that all digital services are taxed at the correct rate. Overall, the taxation of digital services in Maryland depends on many factors, including the type of service and the various international tax initiatives in effect. It is important for businesses to stay up to date on the taxation rules and regulations that apply to digital services in order to ensure that all taxes are paid correctly.
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