Bill
SB 1037
Baltimore City would gain authority to impose a local sales tax up to 2% on tangible personal property and taxable services, collected like the state tax to boost city revenue.
Status & Timing
- Bill number: SB 1037 (Baltimore City Senators). Companion: HB 1508.
- Introduced/Filed: January 31, 2025. First reading in Senate Rules (February 2025). Effective date specified in the bill: July 1, 2025 (if enacted).
- Fiscal and policy note prepared by Maryland Department of Legislative Services (First Reader, March 10, 2025).
Purpose
- Authorizes the Mayor and City Council of Baltimore City to enact, by local law, a municipal sales tax on retail sales in Baltimore City (subject to limits and conditions specified in the bill). The authorization is intended to provide Baltimore City with an additional locally controlled revenue source.
Key provisions
- Authority: Baltimore City may impose a sales tax on retail sales of tangible personal property and on taxable services in the City (codified by adding/amending sections to Article — Tax — General: 2–1302.5; 11–102(c); 11–104(l)).
- Rate cap: The municipal sales tax rate may not exceed 2% of the taxable price.
- Relation to State tax: The City sales tax is levied in addition to the State sales and use tax (the State base rate referenced is 6% in current law).
- Collection/administration: The City sales tax must be collected and administered in the same manner as the State sales and use tax (Comptroller administration, return/payment processes).
- Notice requirement: Baltimore City must give the Comptroller at least 6 months’ notice before the municipal sales tax takes effect or before any rate change.
- Distribution: The bill adds a Comptroller distribution provision so the sales tax collected under the new municipal authorization is distributed to Baltimore City (amending tax distribution language).
Who is affected
- Baltimore City government: gains a new locally controlled revenue option (up to 2%).
- Consumers in Baltimore City: would pay higher combined sales tax if the City adopts a municipal rate.
- Retailers and service providers operating in Baltimore City: required to collect and remit the additional municipal tax; will face implementation and compliance obligations.
- Comptroller’s Office (State): responsible for administering and distributing the new tax and for enforcement.
Fiscal impact (per DLS fiscal note)
- Local revenues: Based on FY 2024 allocations, Baltimore City could receive approximately:
- ~$100 million annually if it imposes a 1% municipal sales tax;
- ~$200 million annually if it imposes a 2% municipal sales tax.
- State/Comptroller administrative costs: Special fund expenditures increase by $879,044 in FY 2026 (includes $750,000 one-time computer programming to add the city tax to tax systems and two new staff for audit/distribution), with ongoing special fund costs of roughly $150K–$170K annually thereafter. These administrative costs are expected to be covered by a portion of the municipal tax revenue designated to cover Comptroller administrative expenses.
- Small businesses: the fiscal note flags a meaningful impact due to collection, reporting and compliance responsibilities.
Other considerations
- The municipal tax applies only to the categories taxable under State law (tangible personal property and taxable services); exemptions that apply under State law would generally carry over.
- Potential economic effects include increased cost to consumers, possible consumption shifts or cross-border shopping, and impacts on retailer competitiveness depending on regional tax differences.
- The bill preserves existing State distributions (including the Blueprint for Maryland’s Future percentages) while adding Baltimore City’s share to the distribution sequence.
Compiled from official sources — confirm details with the bill’s official record.
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