Maryland is thinking about joining the double handful of states that collect a sales tax on the price of ebooks and other digital content.
The Maryland House of Delegates is considering legislation (House Bill 426) that would impose sales and use tax on digital products and sales tax on digital codes. If signed into law, Maryland would begin taxing digital products and digital codes on July 1, 2019. House Bill 426 was read for the first time in the Ways and Means Committee on January 31, 2019.
The bill defines “digital product” to mean “a product that is obtained electronically by the buyer and delivered by means other than tangible storage media through the use of technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.” House Bill 426 specifically includes the following in the “digital product” definition:
- Audio – “a work that results from the fixation of a series of sounds that are transferred electronically” (including music or performances, readings of books, speeches, and audio greeting cards sent by e-mail) and ring tones;
- Video – “a series of related images that, when shown in succession, impart an impression of motion, together with any accompanying sounds, that are transferred electronically, including motion pictures, musical videos, news and entertainment programs, live events, video greeting cards sent by e-mail, and video or electronic games”;
- E-Books – a book transferred electronically; and
- E-Periodicals – “a newspaper, magazine, periodical, chat room discussion, weblog, or other similar product that is transferred electronically.”
The issue of sales tax on ebooks is somewhat complicated in the US, with only a patchwork of states collecting it. Oklahoma, for example, couldn't muster the votes to pass a sales tax on digital goods in 2017.
Many states including Virginia exempt digital downloads from state sales taxes while still collecting tax on the sale of physical media. Tennessee, on the other hand, is one of the few states to tax digital products and services in all its forms.