Income Tax and Sales and Use Tax - Rate Reductions and Alterations

EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*hb0133*

HOUSE BILL 133
Q3, Q4 6lr0876
(PRE–FILED)
By: Delegates Bouchat, Valentine, and Wivell
Requested: September 17, 2025
Introduced and read first time: January 14, 2026
Assigned to: Ways and Means

A BILL ENTITLED

AN ACT concerning 1

Income Tax and Sales and Use Tax – Rate Reductions and Alterations 2

FOR the purpose of altering the State individual and corporate income tax rates; repealing 3
a certain income threshold for the application of the income tax on net capital gains; 4
exempting from the income tax on net capital gains a certain amount in net capital 5
gains of an individual who is at least a certain age; altering certain sales and use tax 6
rates; repealing the sales and use tax imposed on certain data or information 7
technology services and system software or application software publishing services; 8
and generally relating to the State income tax and sales and use tax. 9

BY repealing 10
Article – Tax – General 11
Section 2–1302.5, 11–101(c–12) and (m)(14) and (15), 11–246, and 11–403(e) 12
Annotated Code of Maryland 13
(2022 Replacement Volume and 2025 Supplement) 14

BY repealing and reenacting, with amendments, 15
Article – Tax – General 16
Section 2–1303, 4–105(b), 10–105, 11–101(c–1), (c–5), (c–13), (e–1), and (m)(12) and 17
(13), 11–103(c), 11–104, 11–219, 11–301, and 11–403(a) 18
Annotated Code of Maryland 19
(2022 Replacement Volume and 2025 Supplement) 20

BY repealing and reenacting, without amendments, 21
Article – Tax – General 22
Section 11–101(a) 23
Annotated Code of Maryland 24
(2022 Replacement Volume and 2025 Supplement) 25

2 HOUSE BILL 133

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 1
That the Laws of Maryland read as follows: 2

Article – Tax – General 3

10–105. 4

(a) [(1) For an individual other than an individual described in paragraph (2) 5
of this subsection, the State income tax rate is: 6

(i) 2% of Maryland taxable income of $1 through $1,000; 7

(ii) 3% of Maryland taxable income of $1,001 through $2,000; 8

(iii) 4% of Maryland taxable income of $2,001 through $3,000; 9

(iv) 4.75% of Maryland taxable income of $3,001 through $100,000; 10

(v) 5% of Maryland taxable income of $100,001 through $125,000; 11

(vi) 5.25% of Maryland taxable income of $125,001 through $150,000; 12

(vii) 5.5% of Maryland taxable income of $150,001 through $250,000; 13

(viii) 5.75% of Maryland taxable income of $250,001 through $500,000; 14

(ix) 6.25% of Maryland taxable income of $500,001 through 15
$1,000,000; and 16

(x) 6.50% of Maryland taxable income in excess of $1,000,000. 17

(2) For spouses filing a joint return or for a surviving spouse or head of 18
household as defined in § 2 of the Internal Revenue Code, the State income tax rate is: 19

(i) 2% of Maryland taxable income of $1 through $1,000; 20

(ii) 3% of Maryland taxable income of $1,001 through $2,000; 21

(iii) 4% of Maryland taxable income of $2,001 through $3,000; 22

(iv) 4.75% of Maryland taxable income of $3,001 through $150,000; 23

(v) 5% of Maryland taxable income of $150,001 through $175,000; 24

(vi) 5.25% of Maryland taxable income of $175,001 through $225,000; 25

(vii) 5.5% of Maryland taxable income of $225,001 through $300,000; 26
HOUSE BILL 133 3

(viii) 5.75% of Maryland taxable income of $300,001 through $600,000; 1

(ix) 6.25% of Maryland taxable income of $600,001 through 2
$1,200,000; and 3

(x) 6.50% of Maryland taxable income in excess of $1,200,000.] 4

(1) FOR AN INDIVIDUAL OR FOR SPOUSES FILING A JOINT RETURN 5
WITH FEDERAL ADJUSTE D GROSS INCOM E IN EXCESS OF $10,000, THE STATE 6
INCOME TAX RATE IS 3%. 7

[(3)] (2) (i) Except as provided in subparagraph (ii) of this paragraph, 8
if the Maryland adjusted gross income of an individual described in paragraph (1) [or (2)] 9
of this subsection includes any amount of net capital gain, as defined and determined under 10
the Internal Revenue Code, the State income tax for the individual is the sum of: 11

1. [the rates specified in paragraph (1) or (2) of this 12
subsection] 3% applied to Maryland taxable income; and 13

2. an additional [2%] 3% of the amount of net capital gain 14
included in the individual’s Maryland adjusted gross income. 15

(ii) To the extent included in calculating net capital gain for federal 16
income tax purposes, any amount of capital gain from the sale or exchange of the following 17
assets is not subject to the additional [2%] 3% tax rate specified in subparagraph (i)2 of 18
this paragraph: 19

1. any residential dwelling sold for less than $1,500,000 that 20
is the individual’s primary residence, including the land on which the dwelling is located 21
and any accessory dwelling unit associated with the residence, if the dwelling is a 22
single–family home, a town house, a row home, a residential condominium unit, or a 23
residential cooperative unit; 24

2. assets held in: 25

A. a cash or deferred arrangement plan under § 401(k) of the 26
Internal Revenue Code; 27

B. a tax –sheltered annuity or custodial account under § 28
403(b) of the Internal Revenue Code; 29

C. a deferred compensation plan under § 457(b) of the 30
Internal Revenue Code; 31

4 HOUSE BILL 133

D. an individual retirement account or individual retirement 1
annuity under § 408 of the Internal Revenue Code; 2

E. a Roth individual retirement account under § 408A of the 3
Internal Revenue Code; or 4

F. a defined contribution plan, a defined benefit plan, or a 5
similar retirement savings plan; 6

3. cattle, horses, or breeding livestock held for more than 12 7
months if, for the taxable year of the sale or exchange, more than 50% of the individual’s 8
gross income for the taxable year, including income from the sale or exchange of capital 9
assets, is from farming or ranching; 10

4. land that is subject to a conserva tion, agricultural, or 11
forest preservation easement or that will be subject to a conservation, agricultural, or forest 12
preservation easement on the sale or exchange of the land; 13

5. property used in a trade or business, the cost of which is 14
deductible under § 179 of the Internal Revenue Code; or 15

6. affordable housing owned by a nonprofit organization. 16

[(4) The provisions of paragraph (3) of this subsection shall apply for 17
individuals described in paragraph (1) or (2) of this subsection with a federal adjusted gross 18
income in excess of $350,000.] 19

(3) THE PROVISIONS OF PAR AGRAPH (2) OF THIS SUBSECTION D O 20
NOT APPLY TO THE FIR ST $10,000 OF NET CAPITAL GAINS OF AN INDIVIDUAL WHO 21
IS AT LEAST 65 YEARS OLD. 22

(b) The State income tax rate for a corporation is [8.25%] 3% of Maryland taxable 23
income. 24

(c) For a married couple filing a joint income tax return, the [rates] RATE 25
specified in subsection (a) of this section [apply] APPLIES to the joint Maryland taxable 26
income of the married couple. 27

(d) For a nonresident: 28

(1) the [rates] RATE specified in subsection (a) of this section [apply] 29
APPLIES to the nonresident’s Maryland taxable income, calculated without regard to the 30
subtractions under § 10–210(b), (e), and (f) of this title; and 31

(2) the State income tax imposed equals the result obtained under item (1) 32
of this subsection multiplied times a fraction: 33
HOUSE BILL 133 5

(i) the numerator of which is the nonresident’s Maryland taxable 1
income, calculated with the subtractions under § 10–210(b), (e), and (f) of this title; and 2

(ii) the denominator of which is the nonresident’s Maryland taxable 3
income, calculated without regard to the subtractions under § 10–210(b), (e), and (f) of this 4
title. 5

SECTION 2. AND BE IT FURTHER ENACTED, That the Laws of Maryland read 6
as follows: 7

Article – Tax – General 8

[2–1302.5. 9

After making the distributions required under §§ 2 –1301 through 2 –1302.4 of this 10
subtitle, of the sales and use tax collected under § 11–104(l) of this article, the Comptroller 11
shall distribute the revenue to the General Fund of the State.] 12

2–1303. 13

After making the distributions required under §§ 2 –1301 through [2–1302.5] 14
2–1302.4 of this subtitle, the Comptroller shall pay: 15

(1) revenues from the hotel surcharge into the Dorchester County 16
Economic Development Fund established under § 10 –130 of the Economic Development 17
Article; 18

(2) to the Blueprint for Maryland’s Future Fund established under § 5–206 19
of the Education Article , the following percentage of the remaining sales and use tax 20
revenues: 21

(i) for fiscal year 2023, 9.2%; 22

(ii) for fiscal year 2024, 11.0%; 23

(iii) for fiscal year 2025, 11.3%; 24

(iv) for fiscal year 2026, 11.7%; and 25

(v) for fiscal year 2027 and each fiscal year thereafter, 12.1%; and 26

(3) the remaining sales and use tax revenue into the General Fund of the 27
State. 28

4–105. 29

6 HOUSE BILL 133

(b) If gross receipts subject to the admissions and amusement tax are also subject 1
to the sales and use tax, a county or a municipal corporation may not set a rate so that, 2
when combined with the sales and use tax, the total tax rate will exceed [11%] 8% of the 3
gross receipts. 4

11–101. 5

(a) In this title the following words have the meanings indicated. 6

(c–1) “Customer tax address” means, with respect to a sale of a digital code [,] OR 7
digital product [, or taxable service described under subsection (m)(14) or (15) of this 8
section]: 9

(1) for a digital code [,] OR digital product[, or taxable service described 10
under subsection (m)(14) or (15) of this section] that is received by a buyer at the business 11
location of the vendor, the address of that business location; 12

(2) if item (1) of this subsection is not applicable and the primary use 13
location of the digital code [,] OR digital product [, or taxable service described under 14
subsection (m)(14) or (15) of this section] is known by the vendor, that primary use location; 15

(3) if items (1) and (2) of this subsection are not applicable, the location 16
where the digital code[,] OR digital product[, or taxable service described under subsection 17
(m)(14) or (15) of this section ] is received by the buyer, or by a donee of the buyer that is 18
identified by the buyer, if known to the vendor and maintained in the ordinary course of 19
the vendor’s business; 20

(4) if items (1) through (3) of this subsection are not applicable, the location 21
indicated by an address for the buyer that is available from the business records of the 22
vendor that are maintained in the ordinary course of business of the vendor’s business, 23
when use of the address does not constitute bad faith; 24

(5) if items (1) through (4) of this subsection are not applicable, the location 25
indicated by an address for the buyer obtained during the consummation of the sale, 26
including the address of the buyer’s payment instrument, when use of the address does not 27
constitute bad faith; or 28

(6) if items (1) through (5) of this subsection are not applicable, including 29
a circumstance in which a vendor is without sufficient information to apply those items, 30
one of the following locations, as selected by the vendor, provided that the loc ation is 31
consistently used by the vendor for all sales to which this item applies: 32

(i) the location in the United States of the headquarters of the 33
vendor’s business; 34

HOUSE BILL 133 7

(ii) the location in the United States where the vendor has the 1
greatest number of employees; or 2

(iii) the location in the United States from which the vendor makes 3
digital products available for electronic transfer. 4

(c–5) (1) “End user” means any person who receives or accesses a digital code[,] 5
OR digital product code[, or taxa ble service described under subsection (m)(14) or (15) of 6
this section] for use. 7

(2) “End user” does not include any person who receives a digital code [,] 8
OR digital product[, or taxable service described under subsection (m)(14) or (15) of this 9
section] for further commercial broadcast, rebroadcast, transmission, retransmission, 10
licensing, relicensing, distribution, redistribution, or exhibition of the digital product. 11

[(c–12) “NAICS” means the North American Industrial Classification System, 12
United States Manual, 2022 Edition, published by the United States Office of Management 13
and Budget.] 14

[(c–13)] (C–12) “Permanent” means perpetual or for an indefinite or unspecified 15
length of time. 16

(e–1) (1) “Primary use location” means the street address repre sentative of 17
where the buyer’s use of a digital code [,] OR digital product[, or taxable service described 18
under subsection (m)(14) or (15) of this section] will primarily occur, as determined by: 19

(i) the residential street address or a business street address of the 20
actual end user of the digital code[,] OR digital product[, or taxable service described under 21
subsection (m)(14) or (15) of this section] including, if applicable, the address of a donee of 22
the buyer that is designated by the buyer; or 23

(ii) if the buyer is not an individual, the location of the buyer’s end 24
users, including employees, or equipment that makes use of the digital code [,] OR digital 25
product[, or taxable service described under subsection (m)(14) or (15) of this section]. 26

(2) “Primary use location” does not include the location of a person who is 27
not any end user or who uses a digital code [,] OR digital product [, or taxable service 28
described under subsection (m)(14) or (15) of this section ] as the purchaser of a separate 29
good or service from the buyer. 30

(m) “Taxable service” means: 31

(12) a prepaid telephone calling arrangement; OR 32

8 HOUSE BILL 133

(13) the privilege given to an individual under § 4 –1102 of the Alcoholic 1
Beverages and Cannabis Article to consume wine that is not purchased from or provided 2
by a restaurant, club, or hotel[; 3

(14) a data or information technology service described under NAICS Sector 4
518, 519, or 5415; or 5

(15) a system software or application software publishing service described 6
under NAICS Sector 5132]. 7

11–103. 8

(c) The retail sale of a digital code [,] OR digital product [, or taxable service 9
described under § 11 –101(m)(14) or (15) of this subtitle ] shall be presumed to be made in 10
the state in which the customer tax address is located. 11

11–104. 12

(a) Except as otherwise provided in this section, the sales and use tax rate is[: 13

(1) for a taxable price of less than $1: 14

(i) 1 cent if the taxable price is 20 cents; 15

(ii) 2 cents if the taxable price is at least 21 cents but less than 34 16
cents; 17

(iii) 3 cents if the taxable price is at least 34 cents but less than 51 18
cents; 19

(iv) 4 cents if the taxable price is at least 51 cents but less than 67 20
cents; 21

(v) 5 cents if the taxable price is at least 67 cents but less than 84 22
cents; and 23

(vi) 6 cents if the taxable price is at least 84 cents; and 24

(2) for a taxable price of $1 or more: 25

(i) 6 cents for each exact dollar; and 26

(ii) for that part of a dollar in excess of an exact dollar: 27

1. 1 cent if the excess over an e xact dollar is at least 1 cent 28
but less than 17 cents; 29

HOUSE BILL 133 9

2. 2 cents if the excess over an exact dollar is at least 17 cents 1
but less than 34 cents; 2

3. 3 cents if the excess over an exact dollar is at least 34 cents 3
but less than 51 cents; 4

4. 4 cents if the excess over an exact dollar is at least 51 cents 5
but less than 67 cents; 6

5. 5 cents if the excess over an exact dollar is at least 67 cents 7
but less than 84 cents; and 8

6. 6 cents if the excess over an exact dollar is at least 84 9
cents] 3%. 10

(b) If a retail sale of tangible personal property or a taxable service is made 11
through a vending or other self –service machine, the sales and use tax rate is [6%] 3%, 12
applied to [94.5%] 97% of the gross receipts from the vending machine sales. 13

(c) (1) In this subsection: 14

(i) “short–term vehicle rental” means a rental of a passenger car, as 15
defined in § 11–144.2 of the Transportation Article, or a vehicle that may be registered as 16
a Class D, E, F, G, or M vehicle under Title 13, Subtitle 9 of the Transportation Article, for 17
a period of 180 days or less under the following terms: 18

1. the vendor does not provide a driver for the vehicle as a 19
part of the rental; and 20

2. if the vehicle is a passenger car, as defined in § 11 –144.2 21
of the Transportation Article, a multipurpose passenger vehicle, or a motorcycle, the vehicle 22
is not to be used to transport individuals or property for hire; and 23

(ii) “short–term vehicle rental” does not include a rental of: 24

1. a dump truck, as described in § 13 –919 of the 25
Transportation Article; 26

2. a tow truck, as described in § 13–920 of the Transportation 27
Article; 28

3. a farm vehicle exempt from the sales and use tax under § 29
11–201(a) of this title; or 30

4. a shared motor vehicle used for peer –to–peer car sharing 31
and made available on a peer –to–peer car sharing program, as defined in § 19 –520 of the 32
10 HOUSE BILL 133

Insurance Article and that is subject to sales and use tax under subsection (c –1) of this 1
section. 2

(2) The sales and use tax rate for a short–term vehicle rental for a taxable 3
price of $2 or more is: 4

(i) if the vehicle is a passenger car, a multipurpose passenger 5
vehicle, or a motorcycle: 6

1. 23 cents for each exact multiple of $2; and 7

2. for that part of $2 in excess of an exact multiple of $2: 8

A. 1 cent if the excess over an exact multiple of $2 is at least 9
1 cent but less than 9 cents; 10

B. 2 cents if the excess over an exact multiple of $2 is at least 11
9 cents but less than 18 cents; 12

C. 3 cents if the excess over an exact multiple of $2 is at least 13
18 cents but less than 27 cents; 14

D. 4 cents if the excess over an exact multiple of $2 is at least 15
27 cents but less than 35 cents; 16

E. 5 cents if the excess over an exact multiple of $2 is at least 17
35 cents but less than 44 cents; 18

F. 6 cents if the excess over an exact multiple of $2 is at least 19
44 cents but less than 53 cents; 20

G. 7 cents if the excess over an exact multiple of $2 is at least 21
53 cents but less than 61 cents; 22

H. 8 cents if the excess over an exact multiple of $2 is at least 23
61 cents but less than 70 cents; 24

I. 9 cents if the excess over an exact multiple of $2 is at least 25
70 cents but less than 79 cents; 26

J. 10 cents if the excess over an exact multiple of $2 is at least 27
79 cents but less than 87 cents; 28

K. 11 cents if the excess over an exact multiple of $2 is at least 29
87 cents but less than 96 cents; 30

HOUSE BILL 133 11

L. 12 cents if the excess over an exact multiple of $2 is at least 1
96 cents but less than $1.05; 2

M. 13 cents if the excess over an exact multiple of $2 is at least 3
$1.05 but less than $1.14; 4

N. 14 cents if the excess over an exact multiple of $2 is at least 5
$1.14 but less than $1.22; 6

O. 15 cents if the excess over an exact multiple of $2 is at least 7
$1.22 but less than $1.31; 8

P. 16 cents if the excess over an exact multiple of $2 is at least 9
$1.31 but less than $1.40; 10

Q. 17 cents if the excess over an exact multiple of $2 is at least 11
$1.40 but less than $1.48; 12

R. 18 cents if the excess over an exact multiple of $2 is at least 13
$1.48 but less than $1.57; 14

S. 19 cents if the excess over an exact multiple of $2 is at least 15
$1.57 but less than $1.66; 16

T. 20 cents if the excess over an exact multiple of $2 is at least 17
$1.66 but less than $1.74; 18

U. 21 cents if the excess over an exact multiple of $2 is at least 19
$1.74 but less than $1.83; 20

V. 22 cents if the excess over an exact multiple of $2 is at least 21
$1.83 but less than $1.92; and 22

W. 23 cents if the excess over an exact multiple of $2 is at least 23
$1.92 but less than $2.00; or 24

(ii) if the vehicle is a vehicle that may be registered as a Class E, F, 25
or G vehicle under Title 13, Subtitle 9 of the Transportation Article: 26

1. 8 cents for each exact dollar; and 27

2. 2 cents for each 25 cents or part of 25 cents in excess of an 28
exact dollar. 29

(c–1) The sales and use tax rate for sales and charges made in connection with a 30
shared motor vehicle used for peer –to–peer car sharing and made available on a 31
peer–to–peer car sharing program, as defined in § 19–520 of the Insurance Article, is: 32
12 HOUSE BILL 133

(1) except as provided in item (2) of this subsection, 8% of the taxable price; 1
and 2

(2) 11.5% of the taxable price, if the vehicle is a passenger car, a 3
multipurpose passenger vehicle, or a motorcycle that is part of a fleet of vehicles that 4
includes more than 10 vehicles owned by the same person. 5

(d) The sales and use tax rate for the first retail sale of a manufactured home, as 6
defined in § 12–301(g) of the Public Safety Article, is the rate imposed under subsection (a) 7
of this section applied to 60% of the taxable price. 8

(e) The rate of the hotel surcharge imposed under § 11 –102(b) of this subtitle is 9
2.5% of the taxable price. 10

(f) (1) In this subsection, “modular building” includes single –family or 11
multifamily houses, apartment units, or commercial buildings, and permanent additions to 12
single–family or multifamily houses, apartment units, or commercial buildings, comprised 13
of one or more sections that are: 14

(i) intended to become real property; 15

(ii) primarily constructed at a location other than the permanent site 16
at which they are to be assembled; 17

(iii) built to comply with the standards for industrialized buildings 18
under Title 12, Subtitle 3 of the Public Safety Article; and 19

(iv) shipped with most permanent components in place. 20

(2) The sales and use tax rate for the sale of a modular building is the rate 21
imposed under subsection (a) of this section applied to 60% of the taxable price. 22

(g) The sales and use tax rate for the sale of an alcoholic beverage, as defined in 23
§ 5–101 of this article, is: 24

(1) [9%] 3% of the charge for the alcoholic beverage; and 25

(2) [6%] 3% of a charge that is made in connection with the sale of an 26
alcoholic beverage and is stated as a separate item of the consideration and made known 27
to the buyer at the time of sale for: 28

(i) any labor or service rendered; 29

(ii) any material used; or 30

(iii) any property sold. 31
HOUSE BILL 133 13

(h) (1) (i) In this subsection the following words have the meanings 1
indicated. 2

(ii) “Dyed diesel fuel” means diesel fuel that is dyed under U.S. 3
Environmental Protection Agency rules for high sulfur diesel fuel or is dyed under Internal 4
Revenue Service rules for nontaxable use. 5

(iii) “Marina” means a person who maintains a place of business 6
where motor fuel is sold primarily to vessels. 7

(2) If a retail sale of dyed diesel fuel is made by a marina, the sales and use 8
tax rate is [6%] 3%, applied to [94.5%] 97% of the gross receipts from the dyed diesel fuel 9
sales. 10

(i) The sales and use tax rate for a mandatory gratuity or service charge in the 11
nature of a tip for serving food or any type of beverage to a group of more than 10 individuals 12
is [6%] 3%. 13

(j) (1) (i) In this subsection, the following words have the meanings 14
indicated. 15

(ii) “Electronic smoking device” has the meaning stated in § 16
16.7–101 of the Business Regulation Article. 17

(iii) “Tobacco pipe” me ans a pipe made primarily of meerschaum, 18
wood, or porcelain, with a bowl designed to be used without a screen or filter. 19

(iv) “Vaping liquid” has the meaning stated in § 16.7 –101 of the 20
Business Regulation Article. 21

(2) Except as provided in paragrap h (3) of this subsection, the sales and 22
use tax rate is 20% of the taxable price for electronic smoking devices. 23

(3) The sales and use tax for vaping liquid sold in a container that contains 24
5 milliliters or less of vaping liquid is 60% of the taxable price. 25

(4) The sales and use tax for tobacco pipes is 12% of the taxable price. 26

(k) The sales and use tax rate for cannabis, as defined in § 1–101 of the Alcoholic 27
Beverages and Cannabis Article is[: 28

(1) for fiscal years 2024 through 2025, 9%; and 29

(2) for fiscal year 2026 and each fiscal year thereafter, 12%] 3%. 30

14 HOUSE BILL 133

[(l) (1) The sales and use tax for a sale of a taxable service described under § 1
11–101(m)(14) and (15) of this subtitle is 3% of the taxable price. 2

(2) If a different rate from the rate specified under paragraph (1) of this 3
subsection could be applied to a sale or use of tangible personal property, a digital code, a 4
digital product, or a taxable service, the higher rate shall apply to the sale.] 5

11–219. 6

(a) The sales and use tax does not apply to a personal, professional, or insurance 7
service that: 8

(1) is not a taxable service; and 9

(2) involves a sale as an inconsequential element for which no separate 10
charge is made. 11

(b) THE SALES AND USE TAX DOES NOT APPLY TO A SALE OF C USTOM 12
COMPUTER SOFTWARE , REGARDLESS OF THE ME THOD TRANSFERRED OR 13
ACCESSED, OR A SERVICE RELATING TO CUSTOM COMPUTER SOFTWARE THAT: 14

(1) WOULD OTHERWISE BE TAXABLE UNDER THIS TITLE; 15

(2) IS TO BE USED BY A SPECIFIC PERSON; 16

(3) (I) IS CREATED FOR THAT PERSON; OR 17

(II) CONTAINS STANDARD OR PROPRIETARY ROUTINES 18
REQUIRING SIGNIFICANT CREATIVE INPUT TO CUSTOMIZE, CONFIGURE, OR MODIFY 19
THE PROCEDURES AND P ROGRAMS THAT ARE NEC ESSARY TO PERFORM TH E 20
FUNCTIONS REQUIRED FOR THE SOFTWARE TO OPERATE AS INTENDED; AND 21

(4) DO NOT CONSTITUTE A PROGRAM, A PROCEDURE, OR 22
DOCUMENTATION THAT IS MASS PRODUCED AND SOLD TO: 23

(I) THE GENERAL PUBLIC; OR 24

(II) PERSONS ENGAGED IN A TRADE, A PROFESSION, OR AN 25
INDUSTRY, EXCEPT AS PROVIDED IN ITEM (3) OF THIS SUBSECTION. 26

(C) The sales and use tax does not apply to the sale of an optional computer 27
software maintenance contract if the buyer does not have a right, as part of the contract, to 28
receive at no additional cost software products that are separately priced and marketed by 29
the vendor. 30

HOUSE BILL 133 15

[(c)] (D) The sales and use tax does not apply to the use of a taxable service 1
obtained by using a prepaid telephone calling arrangement. 2

[(d) (1) (i) In this subsection the following words have the meanings 3
indicated. 4

(ii) “Cloud computing” means a service that enables on –demand, 5
self–service network access to a shared pool of configurable computer resources, including 6
data storage, analytics, commerce, streaming, e –mail, document sharing, and document 7
editing. 8

(iii) “Qualified cybersecurity business” means an entity organized for 9
profit that is engaged primarily in the development of innovative proprietary cybersecurity 10
technology or the provision of cybersecurity services. 11

(2) The sales and use tax imposed on a taxable se rvice described under § 12
11–101(m)(14) or (15) of this title does not apply to a sale of cloud computing to a qualified 13
cybersecurity business.] 14

[11–246. 15

(a) (1) In this section the following words have the meanings indicated. 16

(2) “Emerging technology development area” means the University of 17
Maryland’s Discovery District located in Prince George’s County. 18

(3) “Qualified company” means a company that contracts with the 19
University of Maryland’s Applied Research Laboratory for Intelligence and Securit y to 20
develop systems and technologies to advance the use of quantum computers. 21

(b) The sales and use tax imposed on a taxable service described under § 22
11–101(m)(14) or (15) of this title does not apply to a sale: 23

(1) to a qualified company located in an emerging technology development 24
area made in connection with the work of the company; or 25

(2) by a qualified company located in an emerging technology development 26
area.] 27

11–301. 28

The sales and use tax is computed on: 29

(1) the taxable price of each separate sale; 30

16 HOUSE BILL 133

(2) if a combined sale is made, the combined taxable price of all retail sales 1
on the same occasion by the same vendor to the same buyer; or 2

(3) if retail sales of tangible personal property or a taxable service are made 3
through vending or other self–service machines, [94.5%] 97% of the gross receipts from the 4
retail sales. 5

11–403. 6

(a) [(1)] In this section [the following words have the meanings indicated. 7

(2) “Affiliated group” has the meaning stated under § 1504 of the Internal 8
Revenue Code and includes related parties described under § 267(b)(10), (11), or (12) of the 9
Internal Revenue Code. 10

(3) “Pass–through entity” has the meaning stated in § 10 –102.1 of this 11
article. 12

(4) “Related pass –through entities” means one or more pass –through 13
entities connected through ownership with a common parent pass–through entity but only 14
if the common parent: 15

(i) possesses at least 80% of the total voting power of the 16
pass–through entity; and 17

(ii) has a value equal to at le ast 80% of the total value of the 18
pass–through entity. 19

(5) “Sales”], “SALES” includes a booking transaction made through a 20
short–term rental platform. 21

[(e) (1) A buyer may present to the vendor a certificate indicating multiple 22
points of use of a dig ital code, digital product, or taxable service described under § 23
11–101(m)(14) or (15) of this title, if: 24

(i) the buyer knows at the time of purchase that the digital code, 25
digital product, or taxable service described under § 11–101(m)(14) or (15) of this title will 26
be: 27

1. concurrently available for use by the buyer in more than 28
one taxing jurisdiction; or 29

2. resold in its original form to a member of an affiliated 30
group or a related pass–through entity of which the buyer is also a member; and 31

(ii) the buyer delivers to the vendor the certificate indicating 32
multiple points of use at the time of purchase. 33
HOUSE BILL 133 17

(2) On receipt of the fully completed certificate indicating multiple points 1
of use, the vendor is relieved of the obligation to collect, pay, or remit the applicable tax to 2
the Comptroller and, subject to paragraph (4) of this subsection, the buyer is obligated to 3
collect, pay, or remit the applicable tax to the Comptroller. 4

(3) The buyer delivering the certificate indicating multip le points of use 5
may use any reasonable but consistent and uniform method of apportionment that is 6
supported by the buyer’s records as they exist at the time of the sale and accurately reflects 7
the primary use location in the State. 8

(4) (i) If the apportionment on the certificate indicating multiple points 9
of use is determined based on a subsequent resale to one or more members of an affiliated 10
group or related pass –through entities, the affiliated member or related pass –through 11
entity reselling the digi tal code, digital product, or taxable service described under § 12
11–101(m)(14) or (15) of this title to another affiliated member or related pass –through 13
entity shall: 14

1. assume or absorb the sales and use tax due from the 15
affiliated member or members or related pass–through entity or entities on that portion of 16
the sale apportioned to the State and pay the sales and use tax due on behalf of the affiliated 17
member or members or related pass–through entity or entities; or 18

2. be liable for the sales and use tax due from the affiliated 19
member or members or related pass–through entity or entities if the sales and use tax due 20
is not paid by the affiliated member or members or related pass–through entity or entities. 21

(ii) If the sales and use tax is paid as provided in subparagraph (i) of 22
this paragraph, the affiliated member end user or related pass –through entity end user is 23
relieved of the obligation to pay or remit the applicable tax to the Comptroller. 24

(5) Notwithstanding any other provision of this subsection, if the taxable 25
price of a subsequent resale of a digital code, digital product, or taxable service described 26
under § 11 –101(m)(14) or (15) of this title to an affiliated group member or related 27
pass–through entity is higher than the taxa ble price on which the sales and use tax was 28
paid, the end user shall be liable for the additional sales and use tax due on the difference 29
in the taxable price. 30

(6) The certificate indicating multiple points of use shall include all 31
information required by the Comptroller.] 32

SECTION 3. AND BE IT FURTHER ENACTED, That this Act shall take effect July 33
1, 2026, and Section 1 of this Act shall be applicable to all taxable years beginning after 34
December 31, 2025. 35