2024 overview of sales tax in Maryland

Welcome to Kintsugi's rundown on tax rates in the state of Maryland. Maryland's sales tax rates can vary depending on state, county/city, and local tax rates, making it essential to understand the specifics of sales tax in Maryland.

The base Maryland sales tax rate stands at 6%, which applies uniformly across the state.

However, additional local taxes can alter the total rate consumers pay. For instance, Montgomery County has some of the highest local tax rates, pushing the total up slightly. Conversely, Garrett County boasts one of the lowest combined rates.

Within districts, Baltimore has higher combined rates due to local add-ons, while less populated districts like Worcester tend to have the lowest additional rates.

Sales tax range in Maryland

Maryland's sales tax landscape in 2024 has experienced some deliberate adjustments compared to 2023. Here’s a concise breakdown of the changes:

2023

• The general state sales tax rate in Maryland in 2023 was 6%.
• Specific items like alcoholic beverages were taxed at 9%.
• The sales tax on non-prescription drug products remained exempt.
• Clothing and footwear under $100 had no sales tax, aligning with the annual tax-free shopping week.

2024

• The general state sales tax rate remains at 6%, indicating stability in the baseline tax rate.
• Alcoholic beverages continue to be taxed at 9%, maintaining the previous year's rate.
• Certain digital goods now face a newly introduced tax rate of 6%, an area that was previously exempt in 2023.
• The tax exemption for non-prescription drug products remains in place, showing no change from 2023.
• The annual tax-free shopping week still applies, with clothing and footwear under $100 exempt from sales tax. However, the threshold for individual item pricing is now explicitly highlighted to include a wider range of footwear categories.

These changes demonstrate Maryland's focus on stabilizing core tax rates while adjusting specific categories to adapt to emerging market trends like digital goods taxation.

Utilizing tools like an md sales tax calculator is also beneficial for staying updated with any legislative changes affecting tax rates or regulations. As seen in the adjustments from 2023 to 2024, having accurate calculations aids in better financial planning and compliance. For instance, when Maryland increased its general sales tax rate to 7%, businesses using these calculators could quickly adapt to the new rates without manual errors.

Calculating Maryland sales tax

Determine the general md state sales tax rate

The general state sales tax rate in Maryland is 6%.

Identify if any local sales tax applies

Maryland does not have local sales tax rates, unlike some states; however, understanding md sales tax is crucial for all businesses operating in the state.

Calculate the tax on tangible goods

Multiply the purchase price of the product by the state tax rate (6%).

Determine if the purchase falls under a specific category

E-commerce:

E-commerce sales within Maryland are subject to the 6% state sales tax.

Software as a Service (SaaS):

SaaS products delivered electronically are generally not taxable.

Services:

• Most personal and professional services are not taxable in Maryland.
• Specific taxable services include some telecommunications services and security services.

Account for special categories or exemptions:

Certain goods like groceries (unprepared food) and prescription medicines are exempt from sales tax.

Conduct the final sales tax calculation

Example: For a $100 tangible product purchase within Maryland, the sales tax would be $100 x 0.06 = $6.

Verify end-use exemptions or special conditions:

Confirm if the buyer qualifies for specific exemptions based on the transaction purpose (e.g., resale, manufacturing).

Confirm compliance with Maryland tax regulations:

Ensure accurate tax collection and reporting as per Maryland Comptroller’s guidelines.

Understanding use tax in Maryland

Use tax in Maryland is a complementary tax to the sales tax, applied to purchases where the md state sales tax has not been paid, ensuring all purchases are subject to the Maryland sales tax rate. Typically, this arises from out-of-state purchases, online shopping, mail-order goods, and certain residential services. The tax is designed to level the playing field between in-state and out-of-state sellers, ensuring that all goods consumed in Maryland are taxed equally.

In Maryland, the use tax rate mirrors the state sales tax rate, which is typically 6%. Specific exceptions exist, such as a 9% tax on liquor. Maryland residents and businesses are responsible for self-assessing and remitting use tax on taxable purchases where the vendor did not collect Maryland sales tax. This often includes purchases from out-of-state retailers not required to collect Maryland’s tax.

For those involved in both physical and online commerce, an md sales tax calculator proves invaluable, especially when factoring in Washington DC sales tax for businesses operating in both regions. It streamlines tax calculations across different jurisdictions within Maryland, making it easier to manage financial obligations. Businesses can swiftly navigate through various tax scenarios and remain compliant with the ever-changing regulations.

Compliance is primarily facilitated through individual income tax returns, where Marylanders can declare use tax for the previous year, including car sales tax in Maryland. For businesses, use tax compliance involves filing periodic returns, typically coinciding with sales and use tax reporting periods—either monthly, quarterly, or annually, determined by the volume of taxable sales, including the car sales tax and the auto sales tax in md.

There are certain exemptions to the use tax. Many items that are exempt from sales tax in Maryland, such as prescription medicines and certain agricultural supplies, are also exempt from use tax. To avoid double taxation, items purchased for resale or as components for manufactured products are likewise exempt if proper documentation, such as a resale certificate, is provided.

Enforcement of use tax compliance is critical, as non-compliance can result in penalties and interest charges. Maryland utilizes various methods, including audits and information sharing agreements with other states, to identify unpaid use tax. Understanding and complying with 'sales tax Maryland' obligations, along with Washington DC sales tax, is essential for both individuals and businesses to avoid unexpected liabilities and support state revenue systems.

Recent changes to Maryland sales tax

In 2024, Maryland implemented significant changes to its sales tax regulations. These revisions were enacted to streamline tax collection and improve state revenue.

Sales Tax Rate

As of January 1, 2024, the general sales tax rate increased to 7%, up from 6% in 2023, reflecting a significant change in the sales tax in Maryland. This adjustment aims to boost the state's fiscal health.

Digital Goods

Maryland expanded its taxable items list to include more digital products. E-books, digital subscriptions, and software as a service (SaaS) became taxable from April 1, 2024. Previously, in 2023, only some digital goods were subject to sales tax.

Remote Sellers

The threshold for requiring remote sellers to collect Maryland sales tax was lowered. Effective March 1, 2024, any out-of-state business with over $100,000 in gross revenue or 200 transactions annually must collect and remit sales tax. In 2023, the threshold was $200,000 in gross revenue or 500 transactions.

Exemptions

The exemption list saw modifications, with essential goods like diapers and baby formula exempted from sales tax starting February 1, 2024. In 2023, these items were taxed at the standard rate.

Marketplace Facilitators

Beginning January 1, 2024, marketplace facilitators handling over $100,000 in sales or 200 transactions annually must collect and remit sales tax. This aligns with the same threshold set for remote sellers. In 2023, some marketplace facilitators were exempt from this requirement.

These changes reflect Maryland's effort to modernize its tax system and improve compliance across various sectors.

Excise and discretionary taxes and other sales tax considerations in Maryland

Sure! In Maryland, there are several special excise taxes, discretionary taxes, and sales tax considerations you should be aware of for 2024, including understanding the impact of Washington DC sales tax on cross-border transactions. Below is a breakdown:

Sales Tax

• General Sales Tax Rate

The general sales tax rate in Maryland is 6%.

• Alcoholic Beverages

The sales tax rate for alcoholic beverages is 9%.

Excise Taxes

Motor Fuel Tax

Maryland imposes a motor fuel tax, with the rate for gasoline typically around 36.1 cents per gallon, although this rate may be adjusted annually.

Cigarette Tax

Maryland's cigarette tax is $3.75 per pack of 20 cigarettes as of recent updates.

Tobacco Products

Other tobacco products are taxed at varying rates, such as 15% on the wholesale price of cigars.

Alcohol Excise Tax

Maryland charges an excise tax on alcoholic beverages, which includes $1.50 per gallon for distilled spirits, $0.40 per gallon for wine, and $0.09 per gallon for beer.

Specific Sales Tax Exemptions

Clothing

During Maryland's tax-free week, usually held in August, qualifying clothing and footwear priced at $100 or less per item are exempt from the sales tax.

Energy-efficient appliances

Maryland sometimes offers tax-free weekends for energy-efficient appliances, typically during a specified week in February.

Discretionary and Local Taxes

Admissions and Amusement Tax

Local jurisdictions in Maryland can impose an admissions and amusement tax of up to 10% on gross receipts derived from admissions, the use of facilities, and other amusement-related activities.

County and City Taxes

In addition to state sales taxes, some counties and municipalities may impose their local taxes on certain products or services, influencing the overall tax rate for certain purchases.

Other Sales Tax Considerations

Online and Remote Sales

Maryland imposes sales tax on online and remote sales, in compliance with the Wayfair decision, requiring remote sellers to collect sales tax if they meet certain economic nexus thresholds.

Marketplace Facilitators

Marketplace facilitators are required to collect and remit sales tax on behalf of their sellers.

It’s always a good idea to check with the Maryland Comptroller’s office or their official website for the most current tax rates and regulations as they can be subject to change.

Understanding nexus in Maryland for local and out-of-state sellers

Physical nexus

In 2024, Maryland's physical nexus laws for sales tax have maintained much of their framework from 2023, but subtle updates have been introduced to refine and clarify certain regulations. Here is a comparison between the two years:

Physical Presence

2023: The requirement for a seller to have a physical presence in Maryland to collect sales tax included owning or leasing real property, maintaining an office or place of business, or having employees or representatives in the state.

2024: This requirement remains largely unchanged, though the definition has been expanded to include pop-up shops and temporary kiosks to ensure that transient business operations are also subjected to state sales tax laws.

Inventory and Storage

2023: Stored inventory in a Maryland warehouse was considered a physical presence, compelling businesses to collect sales tax.

2024: No significant changes; warehouses and storage facilities still create a physical nexus, but clarifications were made regarding third-party logistics providers' roles, emphasizing that businesses must account for inventory managed on their behalf.

Employee Presence

2023: Employees conducting business activities such as sales, service, or installation within Maryland included in the physical nexus criteria.

2024: This criteria is retained with emphasis on remote workers; a permanent work-from-home arrangement for employees residing in Maryland now undeniably establishes nexus.

Service Providers

2023: Businesses providing installation, repair, or maintenance services needed to collect sales tax.

S2024: The inclusion now explicitly covers digital and virtual services performed within the state, indicating that remote digital services performed by Maryland residents generate a nexus.

These changes reflect Maryland's efforts to capture the evolving nature of business operations and commerce, ensuring comprehensive enforcement of sales tax obligations.

Economic nexus

Economic nexus laws in Maryland establish that out-of-state sellers must collect and remit sales tax if they meet certain sales thresholds. Here are the details for 2024 compared to 2023:

Sales Thresholds2024

Businesses must have over $100,000 in gross revenue or 200 or more separate transactions in the current or previous calendar year to establish economic nexus.2023: Identical thresholds of over $100,000 in gross revenue or 200 or more separate transactions applied.

Remote Sellers 2024

Out-of-state sellers engaging in retail sales of tangible personal property or taxable services are required to collect and remit sales tax if they meet the established thresholds.2023: The same rules applied to out-of-state sellers.

Marketplace Facilitators 2024

Marketplace facilitators must collect sales tax on behalf of their sellers if the combined sales exceed the $100,000 or 200 transaction thresholds.2023: Marketplace facilitators had the same requirement to collect sales tax on behalf of their sellers.

Reporting Requirements 2024

Businesses meeting the economic nexus criteria must register for a Maryland sales tax permit and report and remit taxes on a periodic basis (monthly, quarterly, or annually based on sales volume).2023: Businesses had the same obligation to register, report, and remit taxes if they met the economic nexus thresholds.

Enforcement and Penalties 2024

Strict enforcement with penalties for non-compliance, including fines and interest on late payments.2023: Similar enforcement measures, with penalties for non-compliance.

The economic nexus rules in Maryland for 2024 remain consistent with those in 2023, continuing to impact out-of-state sellers and marketplace facilitators based on sales thresholds and reporting obligations.

Affiliate nexus

In 2024, Maryland continues to enforce its affiliate nexus regulations for sales tax, reflecting an evolution from its 2023 framework. An affiliate nexus exists when a retailer is related to another entity in a way that establishes a taxable connection with the state, including understanding the implications of the auto sales tax in md. Businesses need to be aware of the nuances in these regulations to ensure compliance.

Key Differences Between 2023 and 2024:

Physical Presence: 2023 required a retailer's physical presence in Maryland for nexus; 2024 maintains this but broadens the interpretation, including more types of physical presence such as temporary locations and pop-up stores.

Related Entities: In 2023, a retailer having a related entity, such as a subsidiary that performs services for the seller, created nexus. In 2024, this encompasses more definitions of related entities, tightening control.

Affiliate Activities: 2023 saw nexus established if affiliates engaged in activities benefiting the retailer, like advertising and promotion within Maryland. By 2024, this includes not only direct advertising but any form of customer solicitation or facilitation.

Economic Thresholds: 2023 set a threshold of $100,000 in sales or 200 transactions for nexus creation. 2024 keeps the $100,000 sales threshold but removes the 200 transactions provision, simplifying the calculation.

Third-Party Vendors: In 2023, third-party logistics or fulfillment centers could create nexus if they handled the seller's inventory. By 2024, this rule is clarified further to include digital product facilitators and online marketplace services.

Remote Sellers: 2023 mandated that all remote sellers meeting certain economic thresholds register for sales tax. The 2024 regulations extend this to include more comprehensive digital service provisions, reflecting increasing e-commerce complexities.

Understanding and adapting to these regulations is critical for businesses selling into Maryland. Changes mainly tighten definitions and broaden the scope of what constitutes an affiliate nexus, ensuring that more remote and affiliated entities fall within taxable parameters.

Click-through nexus

In Maryland, the regulations around click-through nexus for sales tax have seen changes from 2023 to 2024. A click-through nexus establishes that an out-of-state seller is subject to sales tax obligations if they have agreements with in-state entities who refer customers through links on their websites. Here’s a comparison:

2023

• Out-of-state vendors were required to collect sales tax if they generated $100,000 in sales or had 200 separate transactions in Maryland.
• The threshold for affiliate agreements was less strictly enforced; fewer out-of-state sellers were impacted by click-through nexus due to higher thresholds.
• Compliance requirements were somewhat less detailed, providing more leeway in documentation and reporting.

2024

• The sales threshold for mandatory tax collection by out-of-state vendors has been reduced to $75,000, making more out-of-state sellers liable.
• Affiliate agreements face stricter scrutiny, with a lower threshold (e.g., $10,000 in affiliate-linked sales) for establishing nexus, resulting in broader applicability.
• Compliance has become more stringent with detailed requirements for documenting affiliate relationships and verifying referral sales.

Marketplace nexus

In 2024, Maryland's marketplace Nexus for sales tax maintains its core principles from 2023 but introduces several key updates:

Economic Nexus Threshold

In 2023, Maryland required out-of-state sellers to collect sales tax if they had over $100,000 in sales or 200 or more separate transactions within the state. This threshold remains the same in 2024, ensuring consistent compliance requirements for remote sellers.

Marketplace Facilitators

Facilitators must continue to collect sales tax on behalf of third-party sellers if they meet the economic nexus criteria. The term 'marketplace facilitators' still broadly includes platforms that enable sales through listing, making payments, and providing fulfillment services.

Taxable Products and Services

The scope of what is taxable remains unchanged in 2024, including tangible personal property, certain digital products, and specified services. Tax rates have not seen an increase from the 6% rate in 2023.

Compliance Procedures

Updated guidance in 2024 emphasizes digital record-keeping and automated systems for tax remittance, aiming to streamline processes for businesses. This builds on 2023's push towards modernized compliance methods.

Reporting and Payment

The reporting deadlines and payment schedules introduced in 2023 are still valid in 2024, with the aim of simplifying tax administration. Monthly, quarterly, and annual filing options depend on the amount of sales tax collected.

Exemptions and Certificates

The exemption categories (e.g., for resale, nonprofit organizations) remain consistent into 2024. The process for obtaining sales tax exemption certificates is unchanged from 2023.

Penalties for Non-Compliance

Enforcement and penalties for failing to comply with sales tax obligations in 2024 reflect those outlined in 2023, including fines and interest on unpaid taxes.

Overall, Maryland continues to refine its approach to marketplace nexus to ensure clarity and efficiency in sales tax collection.

Trade shows

In Maryland in 2024, businesses participating in tradeshows have several sales tax obligations:

Registration

Businesses selling taxable goods must register for a sales and use tax license with the Comptroller of Maryland.

Collection

Collect 6% sales tax on all taxable sales made during the tradeshow.

Remittance

Submit collected sales tax to the Comptroller of Maryland. Frequency depends on the volume of sales (monthly, quarterly, or annually).

Sales Tax Returns

File returns according to the assigned reporting period, detailing taxable sales and taxes collected.

Temporary Vendors

Those with no permanent sales location in Maryland may require temporary permits.

Exempt Sales

Provide exemption certificates for transactions with tax-exempt entities.

Record Keeping

Maintain detailed records of all sales and tax collected for minimum of four years.

Penalties

Failure to comply with sales tax obligations may lead to penalties, interest, and fines.

Fulfillment by Amazon and nexus

Fulfillment By Amazon (FBA) is a service provided by Amazon that allows sellers to store their products in Amazon’s fulfillment centers, which necessitates understanding md sales tax obligations for such transactions. Amazon then picks, packs, ships, and provides customer service for these products. Sellers ship their products to Amazon's warehouses, where Amazon takes over the logistics process, including handling returns and refunds.

Sales Tax Obligations in Maryland for 2024

Nexus: FBA sellers have a physical presence or nexus in Maryland if they store inventory in Amazon's Maryland warehouses, making them responsible for collecting and remitting sales tax.

Marketplace Facilitator Law: Since 2019, Amazon, as a marketplace facilitator, is required to collect and remit Maryland sales tax on behalf of third-party sellers for transactions fulfilled through FBA.

Tax Rate: The Maryland state sales tax rate is generally 6%. This rate applies to most retail sales.

Registration: FBA sellers with inventory in Maryland must register with the Comptroller of Maryland for a sales tax permit.

Collection: Even though Amazon collects sales tax on behalf of third-party sellers, sellers with their own e-commerce websites or other sales channels must still manage their own tax collection.

Returns: Sales tax returns must be filed based on the seller’s business activity. Maryland usually requires monthly, quarterly, or annual filing, depending on sales volume.

Remittance: Taxes collected must be remitted to the state, and all collected taxes must be reported accurately.

Penalties: Failure to comply with Maryland sales tax obligations can result in penalties, interest, and potential legal action.

FBA simplifies logistics for sellers, but it requires adherence to Maryland’s sales tax laws to ensure compliance.

Permits, certificates and sales tax registration in Maryland

To register for sales tax in Maryland in 2024, you'll need to obtain a sales and use tax license from the Comptroller of Maryland. Begin by gathering key business information like your federal EIN, business structure, and contact details. Submit your application online through the Maryland Business Express portal. Once approved, you'll receive your sales tax license, allowing you to collect and remit sales tax in the state.

Registering for sales tax collection in Maryland

To register for sales tax collection in Maryland in 2024, you will need to follow a series of steps to ensure you are compliant with state regulations. Here’s a comprehensive guide:

Determine Eligibility

If you sell tangible personal property or certain services in Maryland, you are required to collect sales tax.

Obtain a Federal Employer Identification Number (EIN)

Before you can register for sales tax in Maryland, you must have a Federal Employer Identification Number (EIN). You can obtain this from the Internal Revenue Service (IRS).

Maryland Business Registration

You must register your business with the Maryland Department of Assessments and Taxation (SDAT) if it hasn’t been registered yet. This step involves creating a business entity, if necessary, and getting a tax identification number.

Complete the Maryland Combined Registration Application

Use the Maryland Combined Registration Online Application to register for sales and use tax, along with other state taxes.

The application can be completed online. You will need to provide details about your business, such as your EIN, business name, business address, and a description of the types of goods or services you will be selling.

Understand Tax Rates and Rules

Familiarize yourself with the different sales tax rates and exemptions in Maryland. This will ensure you collect the correct amount of tax.

Set Up Sales Tax Collection

Ensure your point-of-sale system is set up to collect Maryland sales tax.

If you have an online store, make sure your e-commerce platform is configured to collect sales tax on sales to Maryland customers.

File Returns and Remit Collected Tax

After you’ve registered, you will be required to file periodic sales tax returns and remit the collected tax to the state.

Sales tax returns can typically be filed online through the Comptroller of Maryland’s website.

Keep Records

Maintain detailed records of all sales transactions, tax collected, and submitted returns. Maryland law requires you to keep these records for a specified period, usually several years.

Stay Informed

Stay updated on any changes in sales tax laws or rates in Maryland to ensure ongoing compliance.

By following these steps, you can properly register and comply with sales tax collection requirements in Maryland for 2024. If you have any specific questions or uncertainties, it may be helpful to consult with a tax professional or accountant experienced with Maryland tax laws.

Cost of registering for sales tax in Maryland in 2024

In Maryland, registering for a sales tax permit is generally free of charge. The process involves applying for a sales and use tax license through the Maryland Comptroller's office, typically done online via the Maryland Business Express website. The registration itself does not have a fee, though you should verify this with the Maryland Comptroller’s office or official state resources as fee structures can change. For specific guidance and to ensure you have the latest information, it’s always best to consult directly with Maryland state offices.

Federal tax ID requirements for registering

In Maryland, an Employer Identification Number (EIN) is generally required if you are registering for sales tax, especially if you are operating as a business entity (like a corporation, partnership, or LLC) or if you have employees. An EIN is essentially a federal tax identification number for your business.

To register for sales tax in Maryland, you will typically need an EIN. You can obtain an EIN from the Internal Revenue Service (IRS).

Here's how you can register for an EIN

Online: The fastest way to obtain an EIN is through the IRS website. The online application process typically takes about 15 minutes, and you'll receive your EIN immediately after completing the application. To apply for an EIN online, visit the IRS EIN Application page.

By Mail or Fax: If you prefer not to apply online, you can also apply by mailing or faxing Form SS-4 to the IRS. The processing time is longer compared to the online application.

• Mailing Address: Internal Revenue Service Attn: EIN Operation Cincinnati, OH 45999
• Fax Number: (855) 641-6935
• By Phone: International applicants can also apply by phone by calling 1-267-941-1099.

Once you have your EIN, you can proceed with the Maryland sales tax registration.

To register for Maryland sales tax, you can use the Maryland Comptroller’s website via the online registration system:

• Visit the Maryland Business Express. This platform not only helps with sales tax registration, but also guides you through various business-related registrations in Maryland.

If you're opening a business account and need assistance, the Maryland Comptroller's office offers help and resources that you can access here.

By following these steps, you’ll ensure that you have all the necessary documentation and registrations in place for your business to operate legally in Maryland.

Streamlined sales tax program and Maryland

No, as of 2024, Maryland is not a member of the Streamlined Sales Tax Governing Board and does not participate in the Streamlined Sales and Use Tax Agreement (SSUTA). The state has opted not to join this initiative, which aims to simplify and modernize sales tax collection to facilitate easier compliance for businesses operating across state lines.

Acquiring a business and registering for sales tax in Maryland

Sure! If you’re acquiring a business in Maryland and need to register for sales and use tax, here are the general requirements and steps you'll need to follow:

Determine if You Need to Register

If the business you're acquiring makes sales of taxable goods or services, you need to register for a sales and use tax license.

Obtain Employer Identification Number (EIN)

You must have an EIN, which is issued by the IRS, as it's required for tax purposes.

Complete the Combined Registration Application

Maryland requires businesses to complete a Combined Registration Application which can be used to register for various state taxes, including sales and use tax. This form can typically be filled out online or by paper.

Business Information Required

• Name and address of the business
• EIN
• Names, addresses, and Social Security Numbers of the principal owners
• Description of the business activities and products/services sold

Acquisition Details

Provide details about the business acquisition, such as the name of the previous owner, the date of acquisition, and any pertinent transaction details.

Sales Tax Bonds/Deposits

Depending on the business type and expected sales volume, you might be required to provide a sales tax bond or make a deposit when you register.

Register for an Account in Maryland’s Sales and Use Tax System

Once registered, you will receive a sales and use tax license. This license allows you to collect sales tax from customers and also provides for compliance with reporting and remitting the sales tax to the Comptroller of Maryland.

Post-Registration Compliance

Be aware of your ongoing obligations:

• Display your sales and use tax license prominently at your place of business.
• Collect sales tax on all taxable sales.
• File periodic sales tax returns (monthly, quarterly, or annually, depending on your sales volume) and remit the collected taxes to the state.

Consultation with Professional Advisors

It’s recommended to consult with a tax advisor or an attorney specializing in Maryland tax law to ensure compliance and to understand any nuances specific to the business acquisition.

Make sure to verify with the latest Maryland State regulations, as requirements may change.

Other Maryland registrations to consider

In Maryland, alongside sales tax registration, businesses may need to consider several other registrations to ensure compliance with state and local regulations:

Employer Identification Number (EIN)

If you have employees, you're required to obtain an EIN from the IRS. This number is used for various tax filings.

Maryland Combined Registration Application

This single registration allows businesses to register for various state taxes including sales and use tax, employer withholding tax, and unemployment insurance tax.

Business Personal Property Tax

If your business owns, leases, or uses personal property in Maryland, you must file an annual business personal property return with the Maryland Department of Assessments and Taxation.

Withholding Tax Registration

If you have employees, you need to register for Maryland withholding tax to handle state income tax withholding from employee wages.

Unemployment Insurance

Employers are required to register and pay unemployment insurance tax, which funds state unemployment benefits.

Trade Name Registration

If you operate under a trade name different from the registered legal name of your business, you need to register this trade name with the Maryland Department of Assessments and Taxation.

Occupational Licenses and Permits

Depending on your industry, you might require specific licenses or permits at the state or local level. For example, food service establishments need health permits, and contractors might need specific trade licenses.

Local Registrations and Permits

Check with county and municipal authorities for any additional local registrations or permits required for your business operations, such as zoning permits or signage permits.

Retail and Resale Licenses

If you’re selling tangible personal property, you may need specific retail or resale licenses besides the sales tax permit.

Ensuring all necessary registrations and permits are in place is crucial for legal compliance and smooth business operations in Maryland.

Requirements for online sellers in Maryland

Yes, there are specific requirements for online sellers in regards to sales tax collection in Maryland.

Economic Nexus

Maryland has economic nexus rules which mandate that out-of-state sellers must collect and remit sales tax if they surpass certain thresholds. As of my last update, this threshold is generally $100,000 in sales or 200 transactions in the state annually. This means if you exceed these limits, you are required to register for a sales tax permit and start collecting Maryland sales tax.

Marketplace Facilitators

If you sell through a marketplace facilitator like Amazon or eBay, these platforms are responsible for collecting and remitting sales tax on your behalf for sales made through their websites. However, you should still be aware of your obligations, as they can vary.

Sales Tax Permit

If you meet the economic nexus requirements, you'll need to register for a Maryland sales tax license, which can typically be done through the Maryland Comptroller's Office.

Collecting Sales Tax

Once registered, you’ll be required to collect sales tax on taxable goods and services sold to customers in Maryland. The state sales tax rate is generally 6%.

Filing Returns

You must file sales tax returns regularly. The frequency of filing—monthly, quarterly, or annually—depends on the amount of sales tax collected.

Record-Keeping

Maryland requires sellers to maintain records of gross receipts, taxable and nontaxable sales, and the amount of tax collected.

Ensure you check with Maryland state authorities or tax professionals for the most current laws and to understand fully your obligations.

Collecting sales tax in Maryland

In 2024, businesses operating in Maryland are required to collect sales tax on applicable transactions. With a state sales tax rate of 6%, understanding your responsibilities is crucial. This guide will help you navigate the essential steps to ensure compliance and accurate tax remittance in Maryland.

Understanding origin vs. destination sales tax collection

Maryland follows the "destination-based" sales tax rule for most transactions. This means that the sales tax rate applied is based on the location where the buyer takes possession of the purchased item.

For more details, you can refer to the Comptroller of Maryland's Sales and Use Tax guide: https://www.marylandtaxes.gov/business/sales-use/index.php

Taxable products in Maryland

Certainly! In Maryland, sales tax is applicable to various types of products and services. Here's an overview of the key product genres that generally incur sales tax in the state:

Tangible Personal Property

This includes physical items that can be seen, weighed, measured, felt, or touched. Examples include:

• Electronics (computers, smartphones, TVs)
• Household appliances (refrigerators, microwaves)
• Furniture (tables, chairs, sofas)
• Clothing and footwear

Prepared Foods and Beverages

This includes items that are ready to eat or drink, whether sold for dine-in or take-out. Examples include:

• Restaurant meals
• Coffee shop beverages
• Pre-packaged sandwiches

Digital Products

Certain digital goods are taxable, such as:

• Digital books (eBooks)
• Music downloads
• Streaming services

Services

Not all services are taxable, but those that involve creating or repairing tangible personal property generally are. Examples include:

• Car repair services
• Dry cleaning and laundry services
• Custom software development

Utilities

Charges for utility services such as electricity, gas, and water are also subject to sales tax.

Admissions and Amusement

This includes fees for various forms of entertainment and recreation, such as:

• Movie tickets
• Amusement park admissions
• Concert tickets

It is important to note that certain items and services are exempt from sales tax in Maryland, such as unprepared foods (groceries), prescription medications, and certain medical equipment. Always consult the latest tax guidelines or a tax professional for the most current and comprehensive information.

Non-taxable products in Maryland

In Maryland, there are specific product genres that are exempt from sales tax. Here’s an overview of some of these categories:

Food

Most foods purchased for home consumption are exempt. This includes groceries, excluding alcoholic beverages, candy, dietary supplements, soda, and certain prepared foods.

Prescription Medicines

Prescription medications, including insulin and diabetic supplies, are exempt from sales tax.

Medical Equipment

Items such as wheelchairs, crutches, and other medical equipment purchased by an individual for home use are typically exempt.

Clothing and Footwear

Maryland has a tax-free week in August during which qualifying clothing and footwear priced at $100 or less per item are exempt from the sales tax.

Utilities

Residential purchases of natural gas, electricity, steam, and the first 500 kilowatt-hours of monthly residential electricity use are exempt from sales tax.

Agricultural Products

Items used in farming and agriculture, such as seeds, fertilizers, and farm equipment, are generally exempt.

For the most current and detailed information, given that tax laws and exemptions can change, please refer to the Maryland Comptroller's Office's official resources. The Maryland Comptroller is responsible for tax administration and compliance. To stay updated on the latest regulations, please visit the Maryland Comptroller's website.

Things are changing all the time so please refer to Maryland Comptroller's Office for more information about taxable items within Maryland.

Is SaaS taxable in Maryland?

In Maryland, as of 2024, Software-as-a-Service (SaaS) is generally considered taxable. The state imposes a sales and use tax on digital products and services, including SaaS. Businesses providing SaaS must collect and remit sales tax on these services to comply with Maryland tax regulations.

Are digital products taxable in Maryland?

In Maryland, starting in 2021, digital products such as e-books, digital music, and streaming services became subject to the state's sales and use tax. As of 2024, these digital goods continue to be taxable, meaning consumers must pay applicable taxes when purchasing or subscribing to such products within the state.

Are services taxable in Maryland?

In Maryland, most services are not subject to sales tax. However, specific services, such as hotel accommodations, fabrication, and telecommunications, do incur taxes. Always check with state tax regulations to ensure compliance, as tax laws can change and may have specific exceptions or additional criteria.

Sales tax exemption certificates

In Maryland, sales tax exemption certificates allow eligible entities to make tax-exempt purchases. These are typically issued to nonprofit organizations, government agencies, and certain other qualifying entities. To obtain the certificate, an application must be submitted to the Comptroller of Maryland, proving eligibility. Once approved, the certificate can be presented to vendors at the time of purchase, freeing the buyer from paying sales tax. It is crucial to maintain accurate records of exempt transactions, as both the state and vendors may audit these transactions to ensure compliance. Misuse of the certificate can result in penalties and revocation of exempt status.

State tax holidays in Maryland for 2024

Sales tax holidays are specific periods when certain purchases are exempt from state sales tax, typically to encourage spending on specific categories like school supplies or energy-efficient appliances.

In Maryland for 2024, there are no scheduled sales tax holidays.

Filing sales tax returns in Maryland

Filing sales taxes in Maryland involves several steps:

Register for a Sales Tax License

Obtain a sales tax license from the Comptroller of Maryland through the Maryland Business Express website.

Collect Sales Tax

Charge the appropriate state sales tax rate (6%) on all taxable goods and services.

Keep Records

Maintain records of all sales and tax collected, including receipts and invoices.

Determine Filing Frequency

Filing frequency (monthly, quarterly, or annually) is determined by Maryland based on your total tax liability.

File Sales Tax Return

File your sales tax return online through the Comptroller of Maryland’s bFile system.

Pay the Tax

Pay the collected sales tax when filing your return via electronic funds transfer (EFT) or other accepted methods.

Deadlines

Adhere to the filing deadlines to avoid penalties; for monthly filers, the deadline is the 20th day of the month following the reporting period.

Review and Correct

Review your return for accuracy and correct any errors promptly.

Keep Filing Even if No Sales

File a 'zero return' if you did not collect sales tax for a period you are required to file.

Understand Penalties and Interest

Be aware that late payments incur penalties and interest charges.

For further details and to access the online filing system, visit the Maryland Comptroller's Sales and Use Tax page: Comptroller of Maryland - Sales and Use Tax.

Sales tax filing frequency

In the state of Maryland, the frequency of filing sales tax returns primarily depends on the amount of sales tax a business collects. Generally, businesses with different levels of sales tax collections are required to file at varied intervals: monthly, quarterly, or annually.

Monthly Filing

Businesses that collect sales tax amounting to more than $700 per month are usually required to file their sales tax returns monthly. These filings ensure that higher volumes of tax collections are reported and remitted efficiently to the state's treasury.

Quarterly Filing

Businesses that collect less than $700 but more than $300 per month may be eligible to file their sales tax returns quarterly. This allows these businesses to consolidate their sales tax reporting every three months, simplifying the process for entities with moderate sales volumes.

Annual Filing

Businesses that collect $300 or less per month in sales tax may qualify to file their returns annually. For such businesses, this reduces the administrative burden by limiting the frequency of required tax filings to just once a year.

All businesses must register for a sales and use tax account with the Maryland Comptroller’s office before they begin collecting sales tax. It's important to note that the specific filing frequency is determined and communicated by the Maryland Comptroller based on the business's tax collection patterns. Businesses are obligated to comply with these assigned frequencies and must file their returns accordingly by the specified due dates to avoid penalties and interests on late payments.

Ensuring compliance with these filing frequencies helps businesses avoid any legal or financial issues and contributes to the proper collection and allocation of sales tax revenue for the state of Maryland.

Filing when no sales tax has been collected

In Maryland, if a business is registered for sales tax but fails to collect it, the business remains liable for the unpaid taxes. The state may impose penalties, interest, and potential fines for non-compliance. The Comptroller of Maryland may conduct audits to ensure adherence, and failure to comply can lead to further legal consequences, including liens or revocation of the business’s sales tax permit. It's crucial for businesses to accurately collect and remit sales taxes to avoid these complications.

Penalties for late filing and non-payment of sales taxes

In Maryland, timely filing and payment of sales taxes are essential to comply with state regulations. For late sales tax filing, businesses may incur a penalty of up to 10% of the tax due, plus interest on the overdue amount. This applies if the tax return is not submitted by the due date. The state requires businesses to report and remit sales tax on either a monthly, quarterly, or annual basis, depending on their sales volume. Consistent late filing can lead to more severe penalties and a closer scrutiny of the business's tax practices.

Non-payment of sales taxes in Maryland is treated with increased seriousness. Failure to remit collected sales taxes is considered a breach of trust, as these funds are collected from customers on behalf of the state. Penalties for non-payment can be substantial, including fines, interest charges, and potential legal action. In severe cases, the state may impose liens on business assets or pursue criminal charges against responsible parties. It is crucial for businesses to understand their obligations and ensure timely payment to avoid these consequences. Regular reviews of tax obligations and prompt action on any discrepancies can help maintain compliance and prevent costly penalties.

Sales tax discounts and incentives

In Maryland, as of 2024, businesses can take advantage of various sales tax incentives and discounts designed to encourage economic growth and support local commerce. Here are some key points:

Manufacturing and Production

Businesses involved in manufacturing and production can benefit from exemptions on the purchase of machinery and equipment used directly in the manufacturing process. This helps reduce operational costs for manufacturers.

Research and Development (R&D)

Companies that invest in R&D activities may qualify for sales tax exemptions on equipment and materials used in these endeavors. This is aimed at fostering innovation and technological advancement.

Technology and Biotechnology

Specific incentives are available for businesses in the technology and biotech sectors. These could include exemptions or credits for purchasing specialized equipment or software necessary for their operations.

Enterprise Zones

Businesses located within designated Enterprise Zones can receive various tax incentives, including sales tax exemptions on certain purchases. These zones are intended to stimulate economic activity in targeted areas.

Green Energy and Sustainability

Maryland offers exemptions or reductions in sales tax for businesses that invest in renewable energy systems, energy-efficient appliances, and other sustainable practices. This incentive supports the state’s environmental goals.

Agriculture

Farms and agricultural businesses can benefit from sales tax exemptions on equipment, seeds, fertilizers, and other essential supplies. This helps to support the agricultural sector by lowering input costs.

Small Business Benefits

Small businesses may be eligible for specific discounts or exemptions, particularly if they meet certain criteria such as revenue thresholds or business size. These initiatives aim to support local entrepreneurship and small-scale enterprises.

It's important for businesses to carefully review the specific criteria and application processes for these incentives to ensure eligibility and maximize their benefits.

2024 sales tax filing due dates for Maryland

Coming Soon

Shipping and sales tax in Maryland

When to pay tax on shipping in Maryland

In Maryland, businesses are generally required to charge sales tax on shipping charges if the shipping is part of the sale of taxable goods. Here are key points to consider:

Taxable Shipping Charges

If the goods being shipped are taxable, then the shipping and delivery charges are also subject to sales tax. For example, if a business sells a taxable item like electronics, the shipping fee charged for delivering that item to the customer must also include sales tax.

Shipping Charges for Non-Taxable Goods

If the goods being sold are not subject to sales tax (such as most groceries), then the shipping charges for delivering those goods are likewise not subject to sales tax.

Separately Stated Shipping Charges

To ensure clarity, shipping charges should be separately stated from the cost of the goods on the invoice. This helps in determining the taxability of the shipping charges.

Combined Shipping Charges

If the shipping charge is included in the selling price of the item, it is considered part of the total sales price and is subject to sales tax, irrespective of whether it is separately stated.

Shipping for Mixed Items

If a business delivers both taxable and non-taxable items, the shipping charge needs to be allocated between the taxable and non-taxable goods. Sales tax is only applied to the portion of the shipping charge allocated to the taxable goods.

For any specific scenarios or further details, it's advisable to consult the Maryland Comptroller’s Office or a tax professional familiar with Maryland sales tax regulations.