Maryland legislators are considering a proposed bill to expand the state’s sales tax to certain business-to-business services, a measure that could generate approximately $1 billion in revenue, according to House bill sponsor Delegate David Moon (D). The proposed 2.5% tax, also cross-filed in the Senate by Senator Shelly Hettleman (D-Baltimore County), would apply to services such as accounting, tax preparation, lobbying, and IT support. Legislators are weighing this measure as they work to close a $3 billion budget deficit, with final budget decisions expected in the coming weeks.
Supporters of the proposal argue that it provides a necessary revenue stream to address financial shortfalls, while ensuring the tax system reflects Maryland’s evolving economy. “This comes at a time when we need to generate a menu of options for dealing with a large budget problem,” said Moon. Senate President Bill Ferguson (D-Baltimore City) also emphasized the need for tax structures that align with economic realities, stating that Maryland’s shift toward a service-based economy justifies revisiting tax policies.
Opposition to the measure has been swift, particularly from business groups and Republican lawmakers. Senate Minority Leader Stephen S. Hershey Jr. (R-Upper Shore) criticized the proposal, warning that it would increase business costs and potentially drive companies to neighboring states. The Maryland Chamber of Commerce, via President and CEO Mary Kane, echoed those concerns, cautioning that the tax could force businesses to raise prices or cut jobs, ultimately making the state less competitive.
As the legislative session progresses, the fate of the proposal remains uncertain. Lawmakers are also considering other tax and budgetary measures, including Governor Wes Moore’s broader tax plan, which includes adjustments to personal income tax brackets and a corporate tax modification. With federal budget cuts looming and updated state revenue projections expected soon, the debate over Maryland’s tax structure will continue in the weeks ahead.
2025 Regular Session – House Bill 1554 First Reader
