EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXIS TING LAW.
[Brackets] indicate matter deleted from existing law.
*hb1515*
HOUSE BILL 1515
Q4 4lr3549
HB 1628/20 – W&M
By: Delegate Moon
Introduced and read first time: February 25, 2024
Assigned to: Rules and Executive Nominations
A BILL ENTITLED
AN ACT concerning 1
Sales and Use Tax – Rate Reduction and Services 2
FOR the purpose of altering the definitions of “taxable price” and “taxable service” for the 3
purposes of certain provisions of law governing the sales and use tax to impose the 4
tax on certain labors and services; altering the rate of the sales and use tax; altering 5
the percentage of gross receipts from vending machine sales and from certain sales 6
of dyed diesel fuel to which the sales and use tax is applied; altering the rate of the 7
sales and use tax applied to certain charges made in connection with sales of 8
alcoholic beverages; altering the rate of the sales and use tax applied to certain 9
gratuities and service charges; repealing certain exemptions from the sales and use 10
tax for certain services and contract sales; and generally relating to the sales and 11
use tax. 12
BY repealing and reenacting, without amendments, 13
Article – Tax – General 14
Section 11–101(a) and (l)(1) 15
Annotated Code of Maryland 16
(2022 Replacement Volume and 2023 Supplement) 17
BY adding to 18
Article – Tax – General 19
Section 11–101(c–8) and (m) 20
Annotated Code of Maryland 21
(2022 Replacement Volume and 2023 Supplement) 22
BY repealing and reenacting, with amendments, 23
Article – Tax – General 24
Section 11–101(c–8) and (l)(3), 11–104(a), (b), and (g) through (i), and 11–301 25
Annotated Code of Maryland 26
(2022 Replacement Volume and 2023 Supplement) 27
2 HOUSE BILL 1515
BY repealing 1
Article – Tax – General 2
Section 11–101(m) and 11–219 3
Annotated Code of Maryland 4
(2022 Replacement Volume and 2023 Supplement) 5
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 6
That the Laws of Maryland read as follows: 7
Article – Tax – General 8
11–101. 9
(a) In this title the following words have the meanings indicated. 10
(C–8) “NAICS” MEANS THE NORTH AMERICAN INDUSTRIAL CLASSIFICATION 11
SYSTEM, UNITED STATES MANUAL, 2022 EDITION, PUBLISHED BY THE UNITED 12
STATES OFFICE OF MANAGEMENT AND BUDGET. 13
[(c–8)] (C–9) “Permanent” means perpetual or for an indefinite or unspecified 14
length of time. 15
(l) (1) “Taxable price” means the value, in money, of the consideration of any 16
kind that is paid, delivered, payable, or deliverable by a buyer to a vendor in the 17
consummation and complete performance of a sale without deduction for any expense or 18
cost, including the cost of: 19
(i) any labor or service rendered; 20
(ii) any material used; or 21
(iii) any property, digital code, or digital product sold. 22
(3) “Taxable price” does not include: 23
(i) a charge that is made in connection with a sale and is stated as 24
a separate item of the consideration for: 25
1. a delivery, freight, or other transportation service for 26
delivery directly to the buyer by the vendor or by another person acting for the vendor, 27
unless the transportation service is a taxable service; 28
2. a finance charge, interest, or similar charge for credit 29
extended to the buyer; 30
3. [a labor or service for application or installation; 31 HOUSE BILL 1515 3
4.] a mandatory gratuity or service charge in the nature of a 1
tip for serving food or beverage to a group of 10 or fewer individuals for consumption on the 2
premises of the vendor; 3
[5. a professional service; 4
6.] 4. a tax: 5
A. imposed by a county on the sale of coal, electricity, oil, 6
nuclear fuel assemblies, steam, or artificial or natural gas; 7
B. imposed under § 3–302(a) of the Natural Resources 8
Article, as a surcharge on electricity, and added to an electric bill; 9
C. imposed under §§ 6–201 through 6–203 of the Tax – 10
Property Article, on tangible personal property subject to a lease that is for an initial period 11
that exceeds 1 year and is noncancellable except for cause; or 12
D. imposed under § 4–102 of this article on the gross receipts 13
derived from an admissions and amusement charge; OR 14
[7. any service for the operation of equipment used for the 15
production of audio, video, or film recordings; or 16
8.] 5. reimbursement of incidental expenses paid to a third party 17
and incurred in connection with providing a taxable detective service; 18
(ii) the value of a used component or part (core value) received from 19
a purchaser of the following remanufactured truck parts: 20
1. an air brake system; 21
2. an engine; 22
3. a rear axle carrier; or 23
4. a transmission; or 24
(iii) a charge for a nontaxable service that is made in connection with 25
a sale of a taxable communication service, even if the nontaxable charges are aggregated 26
with and not separately stated from the taxable charges for communications services, if the 27
vendor can reasonably identify charges not subject to tax from its books and records that 28
are kept in the regular course of business. 29
[(m) “Taxable service” means: 30 4 HOUSE BILL 1515
(1) fabrication, printing, or production of tangible personal property or a 1
digital product by special order; 2
(2) commercial cleaning or laundering of textiles for a buyer who is engaged 3
in a business that requires the recurring service of commercial cleaning or laundering of 4
the textiles; 5
(3) cleaning of a commercial or industrial building; 6
(4) cellular telephone or other mobile telecommunications service; 7
(5) “900”, “976”, “915”, and other “900”–type telecommunications service; 8
(6) custom calling service provided in connection with basic telephone 9
service; 10
(7) a telephone answering service; 11
(8) pay per view television service; 12
(9) credit reporting; 13
(10) a security service, including: 14
(i) a detective, guard, or armored car service; and 15
(ii) a security systems service; 16
(11) a transportation service for transmission, distribution, or delivery of 17
electricity or natural gas, if the sale or use of the electricity or natural gas is subject to the 18
sales and use tax; 19
(12) a prepaid telephone calling arrangement; or 20
(13) the privilege given to an individual under § 4–1102 of the Alcoholic 21
Beverages and Cannabis Article to consume wine that is not purchased from or provided 22
by a restaurant, club, or hotel.] 23
(M) (1) “TAXABLE SERVICE ” MEANS ANY ACTIVITY E NGAGED IN FOR A 24
BUYER FOR CONSIDERAT ION. 25
(2) “TAXABLE SERVICE ” DOES NOT INCLUDE : 26
(I) AN EDUCATIONAL SERVI CE (NAICS SECTOR 61); 27
HOUSE BILL 1515 5
(II) A HEALTH CARE OR SOC IAL ASSISTANCE SERVI CE (NAICS 1
SECTOR 62); 2
(III) A SERVICE PROVIDED B Y A RELIGIOUS ORGANI ZATION 3
(NAICS SECTOR 8131); 4
(IV) A GRANTMAKING OR GIV ING SERVICE (NAICS SECTOR 5
8132); 6
(V) A SERVICE PROVIDED B Y A SOCIAL ADVOCACY 7
ORGANIZATION (NAICS SECTOR 8133); 8
(VI) A SERVICE PROVIDED B Y A CIVIC OR SOCIAL ORGANIZATION 9
(NAICS SECTOR 8134); OR 10
(VII) A SERVICE PROVIDED B Y A BUSINESS , PROFESSIONAL , 11
LABOR, OR POLITICAL ASSOCI ATION (NAICS SECTOR 8139). 12
11–104. 13
(a) Except as otherwise provided in this section, the sales and use tax rate is: 14
(1) for a taxable price of less than $1: 15
(i) 1 cent if the taxable price is 20 cents; AND 16
(ii) [2 cents if the taxable price is at least 21 cents but less than 34 17
cents; 18
(iii) 3 cents if the taxable price is at least 34 cents but less than 51 19
cents; 20
(iv) 4 cents if the taxable price is at least 51 cents but less than 67 21
cents; 22
(v) 5 cents if the taxable price is at least 67 cents but less than 84 23
cents; and 24
(vi) 6 cents if the taxable price is at least 84 cents] 1 CENT FOR EACH 25
ADDITIONAL 20 CENTS OR PART OF 20 CENTS; and 26
(2) for a taxable price of $1 or more: 27
(i) [6] 5 cents for each exact dollar; and 28
6 HOUSE BILL 1515
(ii) [for that part of a dollar in excess of an exact dollar: 1
1. 1 cent if the excess over an exact dollar is at least 1 cent 2
but less than 17 cents; 3
2. 2 cents if the excess over an exact dollar is at least 17 cents 4
but less than 34 cents; 5
3. 3 cents if the excess over an exact dollar is at least 34 cents 6
but less than 51 cents; 7
4. 4 cents if the excess over an exact dollar is at least 51 cents 8
but less than 67 cents; 9
5. 5 cents if the excess over an exact dollar is at least 67 cents 10
but less than 84 cents; and 11
6. 6 cents if the excess over an exact dollar is at least 84 12
cents] 1 CENT FOR EACH 20 CENTS OR PART OF 20 CENTS IN EXCESS OF A N EXACT 13
DOLLAR. 14
(b) If a retail sale of tangible personal property or a taxable service is made 15
through a vending or other self–service machine, the sales and use tax rate is [6%] 5%, 16
applied to [94.5%] 95.25% of the gross receipts from the vending machine sales. 17
(g) The sales and use tax rate for the sale of an alcoholic beverage, as defined in 18
§ 5–101 of this article, is: 19
(1) 9% of the charge for the alcoholic beverage; and 20
(2) [6%] 5% of a charge that is made in connection with the sale of an 21
alcoholic beverage and is stated as a separate item of the consideration and made known 22
to the buyer at the time of sale for: 23
(i) any labor or service rendered; 24
(ii) any material used; or 25
(iii) any property sold. 26
(h) (1) (i) In this subsection the following words have the meanings 27
indicated. 28
(ii) “Dyed diesel fuel” means diesel fuel that is dyed under U.S. 29
Environmental Protection Agency rules for high sulfur diesel fuel or is dyed under Internal 30
Revenue Service rules for nontaxable use. 31 HOUSE BILL 1515 7
(iii) “Marina” means a person who maintains a place of business 1
where motor fuel is sold primarily to vessels. 2
(2) If a retail sale of dyed diesel fuel is made by a marina, the sales and use 3
tax rate is [6%] 5%, applied to [94.5%] 95.25% of the gross receipts from the dyed diesel 4
fuel sales. 5
(i) The sales and use tax rate for a mandatory gratuity or service charge in the 6
nature of a tip for serving food or any type of beverage to a group of more than 10 individuals 7
is [6%] 5%. 8
[11–219. 9
(a) The sales and use tax does not apply to a personal, professional, or insurance 10
service that: 11
(1) is not a taxable service; and 12
(2) involves a sale as an inconsequential element for which no separate 13
charge is made. 14
(b) The sales and use tax does not apply to a sale of custom computer software, 15
regardless of the method transferred or accessed, or a service relating to custom computer 16
software that: 17
(1) would otherwise be taxable under this title; 18
(2) is to be used by a specific person; 19
(3) (i) is created for that person; or 20
(ii) contains standard or proprietary routines requiring significant 21
creative input to customize, configure, or modify the procedures and programs that are 22
necessary to perform the functions required for the software to operate as intended; and 23
(4) do not constitute a program, procedure, or documentation that is mass 24
produced and sold to: 25
(i) the general public; or 26
(ii) persons engaged in a trade, profession, or industry, except as 27
provided in item (3) of this subsection. 28
(c) The sales and use tax does not apply to the sale of an optional computer 29
software maintenance contract if the buyer does not have a right, as part of the contract, to 30
receive at no additional cost software products that are separately priced and marketed by 31 8 HOUSE BILL 1515
the vendor. 1
(d) The sales and use tax does not apply to the use of a taxable service obtained 2
by using a prepaid telephone calling arrangement.] 3
11–301. 4
The sales and use tax is computed on: 5
(1) the taxable price of each separate sale; 6
(2) if a combined sale is made, the combined taxable price of all retail sales 7
on the same occasion by the same vendor to the same buyer; or 8
(3) if retail sales of tangible personal property or a taxable service are made 9
through vending or other self–service machines, [94.5%] 95.25% of the gross receipts from 10
the retail sales. 11
SECTION 2. AND BE IT FURTHER ENACTED, That it is the intent of the General 12
Assembly that the Governor’s proposed budget for fiscal year 2026, and for each fiscal year 13
thereafter, shall include funding that is necessary to meet the needs of the Office of the 14
Comptroller to ensure compliance with and enforcement of this Act. 15
SECTION 3. AND BE IT FURTHER ENACTED, That this Act shall take effect 16
January 1, 2025. 17