Hershey Calls for Repeal of Maryland Tech Tax Following Major Revenue Shortfall

Annapolis, Md.— Senate Minority Leader Steve Hershey today called for the repeal of Maryland’s technology services tax following new data showing the policy has dramatically underperformed initial revenue projections.

“When this tax was passed last year, Marylanders were told it would generate nearly $500 million annually,” said Hershey. “Instead, after the first half of the fiscal year, collections are only about $35 million, and annual projections have already been reduced to roughly $110 million. That is a massive gap.”

Hershey emphasized that the results confirm what many warned during last year’s debate that businesses would adapt quickly to avoid the tax.

“Technology services are highly mobile, and businesses responded exactly as expected,” Hershey said. “They restructured contracts, shifted procurement out of state, and delayed investments in Maryland. The result is minimal revenue and maximum economic disruption.”

The tax has also imposed new compliance burdens on nearly 3,000 businesses, many of which had never previously been required to collect Maryland sales tax.

“This policy isn’t hitting large tech companies, it’s impacting Maryland businesses trying to invest in cybersecurity, cloud services, and software tools,” Hershey added. “Unfortunately, Democrats found a way to tax innovation.”

Hershey noted that most states avoid broad taxes on business-to-business technology services due to their complexity and the ease with which companies can shift activity across state lines.

“Maryland has made itself an outlier and the early results speak for themselves,” he said. “A tax that fails to generate the promised revenue while discouraging investment is simply bad policy. The responsible course of action is to repeal it and refocus on pro-growth policies that strengthen Maryland’s economy.”

The elimination of the Tech Tax was advanced through an amendment offered during today’s Senate floor debate on the FY27 Budget. Although the amendment failed, seven democrats joined all thirteen Republicans in voting for the repeal.

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