On February 20, 2020, Delegate Eric Luedtke, a Montgomery County Democrat, introduced proposed legislation (Maryland House Bill 1628 [the Bill]) in the House of Delegates that would greatly expand the types of services subject to state sales and use tax (the Tax).
In addition, the Bill would lower the Tax rate from 6% to 5%.
Under current law, amounts charged for services, including professional services, are generally exempt from the Tax, except for certain enumerated services. The Bill, however, would cause the Tax to apply to “any activity engaged in for a buyer for consideration,” while excluding only certain (i) educational services; (ii) health care or social assistance services; (iii) services provided by a religious organization; (iv) grant-making or giving services; (v) services provided by a social advocacy organization; (vi) services provided by a civic or social organization; and (vii) services provided by a business, professional, labor or political association.
Thus, the Bill would expand the Tax to apply to professional services, such as legal, accounting, engineering and financial services, meaning that such service providers would be required to collect the Tax from their clients and remit the Tax to the Comptroller of Maryland.
One of the Bill’s sponsors indicated that it would create new revenue to fund improvements in Maryland’s public school system.
If enacted, the new law would take effect on January 1, 2021.
Douglas T. Coats
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