Sales and Use Tax - Definition of Retail Sale - Alterations

EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*sb0600*

SENATE BILL 600
Q4 6lr1659

By: Senator Hester
Introduced and read first time: February 5, 2026
Assigned to: Budget and Taxation

A BILL ENTITLED

AN ACT concerning 1

Sales and Use Tax – Definition of Retail Sale – Alterations 2

FOR the purpose of altering the definition of “retail sale” for purposes of provisions of law 3
governing the sales and use tax to exclude certain sales of technology services under 4
certain circumstances; and generally relating to the sales and use tax. 5

BY repealing and reenacting, without amendments, 6
Article – Tax – General 7
Section 11–101(a), (h)(1), and (m)(14) and (15) and 11–102(a) 8
Annotated Code of Maryland 9
(2022 Replacement Volume and 2025 Supplement) 10

BY repealing and reenacting, with amendments, 11
Article – Tax – General 12
Section 11–101(h)(3) 13
Annotated Code of Maryland 14
(2022 Replacement Volume and 2025 Supplement) 15

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMB LY OF MARYLAND, 16
That the Laws of Maryland read as follows: 17

Article – Tax – General 18

11–101. 19

(a) In this title the following words have the meanings indicated. 20

(h) (1) “Retail sale” means the sale of: 21

(i) tangible personal property; 22

2 SENATE BILL 600

(ii) a taxable service; 1

(iii) a digital code; or 2

(iv) a digital product. 3

(3) “Retail sale” does not include: 4

(i) a transfer of title to tangible personal property after its use as 5
facilities, tools, tooling, machinery, or equipment, including dies, molds, and patterns, if: 6

1. at the time of purchase, the buyer is obligated, under the 7
terms of a written contract, to make the transfer; and 8

2. the transfer is made for the same or greater consideration 9
to the person for whom the buyer manufactures goods or performs work; 10

(ii) a sale of tangible personal property, a digital code, or a digital 11
product if the buyer intends to: 12

1. resell the tangible personal property, digital code, or 13
digital product in the form that the buyer receives or is to receive the property, digital code, 14
or digital product; 15

2. use or incorporate the tangible personal property, digital 16
code, or digital product in a production activity as a material or part of other tangible 17
personal property or another digital product to be produced for sale; or 18

3. transfer the tangible personal property, digital code, or 19
digital product as a part of a taxable service transaction; [or] 20

(iii) a sale of a taxable service if the buyer intends to resell the taxable 21
service in the form that the buyer receives or is to receive the service; OR 22

(IV) A SALE OF A TAXABLE SERVICE DESCRIBED UNDER 23
SUBSECTION (M)(14) OR (15) OF THIS SECTION IF: 24

1. THE BUYER INTENDS TO USE OR INCORPORATE T HE 25
TAXABLE SERVICE INTO ANOTHER TAXABLE SERVICE DESC RIBED UNDER 26
SUBSECTION (M)(14) OR (15) OF THIS SECTION FOR SALE; OR 27

2. BOTH THE VENDOR AND THE BUYER ARE MEMBERS OF 28
THE SAME AFFILIATED GROUP, AS DEFINED UNDER § 11–403 OF THIS TITLE, OR ARE 29
RELATED PASS–THROUGH ENTITIES, AS DEFINED UNDER § 11–403 OF THIS TITLE. 30

(m) “Taxable service” means: 31
SENATE BILL 600 3

(14) a data or information technology service described under NAICS Sector 1
518, 519, or 5415; or 2

(15) a system software or application software publishing service described 3
under NAICS Sector 5132. 4

11–102. 5

(a) Except as otherwise provided in this title, a tax is imposed on: 6

(1) a retail sale in the State; and 7

(2) a use, in the State, of tangible personal property, a digital code, a digital 8
product, or a taxable service. 9

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect July 10
1, 2026. 11