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Act Now: New 3% Tech Tax Will Hit Your Business
Mar 20, 2025
This is Not Simply a “Tech Tax” — It Affects Every Maryland Business and Resident
Governor Moore and General Assembly leaders have announced a 3% tech tax on small businesses. This policy would be disastrous for Maryland’s economy, businesses and jobs, undermining our future as a tech hub and leader.
Economic Impact
The implications of the proposed tech tax will impact over 15,000 employers and 99,000 jobs — with many more being affected indirectly. The service sectors primarily impacted, according to initial reports, include:
NAICS 518 (Data Processing, Hosting and Related Services)
- Cloud storage and application hosting (e.g., Google Drive, AWS, Dropbox, iCloud)
- Web hosting and server management
- Video and audio streaming support (e.g., Netflix, YouTube infrastructure)
- Data backup and computer data storage services
NAICS 519 (Other Information Services)
- Web search portals and online directories (e.g., Google, Bing)
- Digital and physical libraries, archives, and bookmobiles
- Reference libraries and research databases
NAICS 5415 (Computer Systems Design and Related Services)
- Website and software development services
- IT consulting and cybersecurity solutions
- Search engine optimization (SEO) and digital marketing tech
- Robotics and AI software design and support
- Computer disaster recovery and data security services
- Software installation and systems integration
NAICS 5132 (Software Design, Development and Publishing)
- Software and app development companies
- Video game design and publishing
- Business software providers (e.g., Microsoft, Adobe)
- Custom enterprise software solutions
The effects of this proposed tax extend far beyond harming one of Maryland’s fastest growing sectors. In today’s interconnected economy, tech services are a fundamental component for businesses across all sectors.
- Small businesses crushed: Every local shop that uses software, websites, IT support, or cloud services will face higher costs
- Jobs at risk: Employers facing sudden tax increases may freeze hiring or cut positions to manage new expenses
- Defense sector threatened: Critical defense contractors will struggle with increased costs, jeopardizing their competitiveness for federal contracts
- Main Street suffering: Family-owned businesses with thin margins will be hit hardest as essential tech services become more expensive
- Competitive disadvantage: While Virginia and other neighboring states attract businesses with incentives, Maryland risks pushing companies across its borders
These higher costs won’t stay with businesses — they’ll be passed down to consumers. In a world where technology touches everything, from your work and child's education to your healthcare, this tax could make essential digital services unaffordable for many Maryland families, widening the digital divide.
Why This Matters to Everyday Marylanders
This isn't just a business issue. When service businesses face higher costs, those increases are passed on to consumers through:
- Increased costs for data and IT services
- Fewer job opportunities as impacted businesses cut back or relocate
- Reduced wage growth as businesses absorb new tax expenses
Business Growth: The Only Sustainable Path Forward
We continue to emphasize that a thriving business community is not just one path forward — it is the only sustainable solution to Maryland's long-term fiscal challenges. Businesses drive job creation, economic growth and innovation.
The proposed $500 million tech tax will not make Maryland more business-friendly or competitive — in fact, it will undermine those qualities and the desired growth in key sectors like technology and innovation. Instead of imposing new taxes that increase costs and hinder investment, Maryland needs policies that foster a competitive environment, attract business investment and support continued growth. These are the steps that will make Maryland more attractive to businesses, helping them thrive and ensuring a prosperous future for the state.
