Gov. Wes Moore said Monday afternoon that the current version of a bill creating a “broad” new tax on business-to-business services will not be in the state’s final budget for fiscal year 2026.

“A broad [business] to [business] tax will not happen in the state of Maryland,” Moore said in Annapolis Monday. He also said legislation taxing sugar-sweetened beverages would not be moving forward this session.

The business-to-business sales tax, proposed by Democrats to help resolve Maryland’s growing $3.3 billion budget deficit, would charge 2.5% on certain professional services that are exempt from the state’s 6% sales tax. Legislators have already acknowledged they are working on narrowing the scope of the original proposal, possibly by reducing the 2.5% amount and the range of services to which it would apply.

Business owners have fought against the proposed tax, with some saying it could drive them out of Maryland or increase costs for their clients.

Senate Minority Leader Steve Hershey, a Republican representing the Eastern Shore, said that it was “good” to hear the governor come out and “forcefully” say that the proposed 2.5% tax on business-to-business services would not move forward. But he added that more detail is necessary before he can fully support Moore’s position.

“I think we have to understand what ‘broad’ means in that situation,” Hershey said. “It didn’t sound like he totally took it off the table, but it sounds like there might be some qualifiers … that we’d want to understand and see what that means.”

Members of the Moore administration provided vague details of what the governor meant by “broad,” saying that it could apply to services that independent consumers pay for, as well, and that conversations about the final policy, including the percentage point of the tax, are ongoing with House and Senate leadership.

The Maryland chapter of the National Federation of Independent Business (NFIB) applauded Moore’s stance in a statement Monday. Still, it conceded that work on the part of the business community “is not done.”

“Any tax that pushes Maryland further down the list of states to do business in shouldn’t be on the table in any form,” NFIB Maryland said. “Small businesses also remain concerned with a proposed increase to their personal income taxes. Such a hike would adversely impact those owners who file as pass-through entities.”

Moore said that when he rolled out his budget in January, he had three “very clear guidelines”: reform the tax system so that it doesn’t severely impact the middle class, make Maryland more economically competitive and invest in people.

“That is exactly where I am to this day, and we have not moved and will not move from those three guidelines,” the governor said.

During his weekly news conference Friday, Senate President Bill Ferguson, a Baltimore Democrat, said that, though new taxes are the “last place we want to be” this session, the 2.5% sales tax on business-to-business services is “still on the table.”

“I think it is a very real possibility that some version of it is on the table in the final menu [of options]” for bridging the budget gap, Ferguson said.

Moore administration officials told reporters Monday that the bill as introduced will not pass.

Additionally, according to Moore, legislation placing a new 2-cent-per-ounce excise tax on the distributors of sugary beverages, powders or syrups will not be moving forward this session.

“We also said that, in order to really support Marylanders — particularly working Marylanders, right now — that we had to be able to drive and get the cost of things down,” he said. “That’s why things like the soda tax will not happen in the state of Maryland, and the soda tax will not be included in the final budget.”

Montgomery County Del. Emily Shetty, who sponsored the For Our Kids Act, portrayed it as a public health bill that would help children and the state’s budget situation.

Revenue from the proposed tax is projected to generate $500 million in fiscal 2027, half of which would be distributed to funds for healthy school meals and child care scholarships and most of the remaining portion going to the state’s general fund.

The bill defines a sugary beverage as a drink that contains added sugars or artificial sweeteners. It does not include natural fruit or vegetable juices, milk, infant formula, beverages for medical use or alcoholic beverages.

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