Maryland’s Tech Tax: A New Barrier to Growth in the Old Line State

Maryland just sent a loud and clear message to businesses across the region: if you’re innovating, investing, or trying to grow in the tech economy—look elsewhere.

On July 1, 2025, Governor Wes Moore’s “tech tax” officially took effect as part of the 2025 Budget Reconciliation and Financing Act. This new 3% sales and use tax on technology and data services may sound modest on paper, but its impact is far from minor. It's a costly, confusing, and regressive blow to Maryland’s business climate—and a gift to neighboring states like Virginia and Delaware.

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A Digital Drag on Business

This isn’t just a tax on “Big Tech.” This is a tax on every business that uses the cloud, hosts a website, stores data, or streams content—which in today’s economy is practically every business. From local bakeries using Square to health startups storing patient records in AWS, the tech tax touches every corner of the economy.

Worse still, the services being taxed—cloud storage, data processing, software publishing, streaming, even cryptocurrency mining—weren’t previously taxed at all. Now, many companies must suddenly sort through vague NAICS codes and navigate new compliance hoops, including Maryland’s Byzantine “Multiple Points of Use” exemption form that shifts the burden to the buyer. In practice, this means small businesses have to become tax law experts overnight, or risk penalties.

The Maryland Chamber of Commerce warned that this tax would damage Moore’s stated goal of building the state into a tech and innovation hub. So did Republican lawmakers, economists, and even some Democrats. But the Moore administration rammed the bill through with limited debate and minimal transparency.

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A Tax Hike by Another Name

Let’s be honest—this is not just a “3%” tax. It’s the first slice of a much larger pie of tax and fee increases designed to cover a massive $3.3 billion budget hole that the Moore administration helped dig. When combined with higher excise fees on cars, cannabis, and emissions inspections—not to mention looming income tax proposals—this is shaping up to be the largest tax increase in modern Maryland history.

If Governor Moore truly believed in supporting innovation and entrepreneurship, he wouldn't be taxing the very infrastructure these sectors rely on. What Silicon Valley was in the 2000s, cloud-based tools and platforms are now. By taxing the lifeblood of modern operations, Maryland risks crippling its own economic future.

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Small Business Exodus

Perhaps the most immediate red flag is the business flight already underway. Del. Brian Crosby (D-St. Mary’s), no Republican firebrand, has openly admitted to moving his own small business across state lines to escape the tax. He’s not alone. Annapolis IT firms are looking at Northern Virginia. Startups that once considered Baltimore are headed for Raleigh or Austin.

Why invest in Maryland when you can get better tax treatment, clearer regulation, and friendlier policies just across the Potomac?

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The “WiFi Tax” Hits Consumers Too

While pitched as a business tax, consumers will inevitably feel it too. Zoom already warned Marylanders that subscription prices may rise. Streaming services, SaaS platforms, and even your iCloud storage plan could cost more—because when the government taxes tech providers, those costs get passed down the line.

It’s effectively a WiFi tax, and it lands hardest on families and small businesses already struggling with inflation, high rent, and rising healthcare costs.

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Bad Optics, Worse Policy

Adding insult to injury, Governor Moore was at a luxury ski resort fundraiser in Colorado as the tax went live—rubbing elbows with donors while small businesses back home scrambled to understand the new rules. Moore has long positioned himself as a bold reformer. But actions speak louder than speeches.

Taxing innovation is not reform. It's regression.

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A Policy at War With Itself

Even the exemptions make little sense. The tax doesn’t apply to quantum computing contracts within the University of Maryland’s Discovery District. So Moore’s administration knows that tech incentives matter—they just don’t seem to think everyone else deserves one.

By carving out exceptions for a select few while taxing the broader digital ecosystem, the policy sends a clear message: if you’re not part of the state’s chosen “innovation corridor,” you’re a revenue target.

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Final Thought: The Risk of Short-Term Thinking

Let’s not sugarcoat it: Maryland’s budget deficit is real. But solving it by taxing the infrastructure of future growth is a classic short-term fix that will worsen long-term problems. It discourages entrepreneurship. It drives out jobs. And it reinforces Maryland’s unfortunate reputation as a high-tax, low-flexibility state for business.

Maryland doesn’t need more taxes on innovation. It needs a governor who respects innovators—and a government that understands you don’t build the economy of the future by taxing the tools that power it.