Learn more about keeping your business compliant with sales tax requirements.
In Maryland a sales tax is imposed on a retail sale, including leases or rentals, of tangible personal property or a taxable service in the state. The use tax is imposed on the use of tangible personal property or a taxable service. The main purpose of the use tax is to insure that you pay taxes on goods purchased outside of Maryland. However, you do not have to pay use tax if sales tax has already been paid.
Sales and use tax rate. Maryland's state tax rate is 6 percent. The following services are considered to be taxable services:
A lease of tangible personal property is considered a sale and, therefore, is subject to sales and use tax. Each lease payment period is considered a separate lease or sale and the tax applies to the entire lease payment for property acquired by lease.
In Maryland the purchaser must pay the sales and use tax to the vendor. If you are a vendor, you collect the tax as a trustee for the state and you must account for the amount collected. If you are a vendor, you do not have to collect the sales and use tax if:
Absorbing the tax is not permitted. A seller may not advertise, state, or otherwise hold out that any part of the sales and use tax:
To obtain a vendor's license you must submit an application to the Comptroller for each place of business where you will sell tangible personal property or a taxable service. This sales tax license is valid indefinitely.
Maryland includes many specific items that are exempt from sales tax — for example, food sold in grocery stores, prescription medicines, and newspapers are generally not taxable. You'll want to check to see if you or the products you purchase or sell are exempt from the tax.
In Maryland, exemption certificates can be used by qualified nonprofit organizations, government entities, and purchasers of utilities that will be used in the production process. The state will accept a valid determination letter of tax-exempt status issued by the IRS under the federal tax code as evidence that an organization qualifies for exemption.
The sales and use tax does not apply to sales of tangible personal property when you, the purchaser, intends to resell the property or use the property in a production activity as part of other tangible personal property to be produced for sale. A resale certificate is generally required from the purchaser for purchases of property or services for resale, otherwise the vendor must collect the tax.
Resale exemption certificate requirements. Certificates for resale should contain the following information:
A purchaser making repeated purchases from a vendor may provide a blanket resale certificate to the vendor. This blanket certificate will relieve the burden of executing a separate certificate for each individual tax-exempt purchase as long as there is no significant change in the operations. The purchaser claims the resale exclusion on subsequent purchases by providing the Maryland registration number on purchase orders.
The blanket resale certificate should follow the general outline below:
Suggested blanket resale certificate
This is to certify that all tangible personal property or taxable services purchased from:_________________ is intended for resale as tangible personal property or for use or incorporation as a material or part of other tangible personal property to be produced for sale.
This certificate shall be considered a part of each order which we shall give, provided that the order bears our Maryland Sales and Use Tax Registration Number, and is continued in force until revoked.
|_____________________________||Buyer's MD Sales Use Tax
Maryland does not have a statute that specifically taxes out-of-state mail order and catalogue sellers. You will be responsible for paying this tax only if you have physical presence within Maryland. To determine if you have physical presence, ask yourself the following:
The following sales tax brackets have been issued by the state of Maryland.
|Taxable Price||Amount of Tax|
|$0.17 to 0.33||0.02|
|$0.34 to 0.50||0.03|
|$0.51 to 0.66 inclusive||0.04|
|$0.67 to 0.83 inclusive||0.05|
As a seller, if your refund claim does not exceed $250, you may request a refund by deducting the amount from the total tax due with any return. If your claim is for more than $250 or in excess of the amount of tax reported on the return, you must file a claim for refund. When you file a claim for refund, you must include supporting documents. Your claim for a refund of sales and use tax must be filed before four years from the date the tax was paid.
For a transaction to be subject to sales and use tax in Maryland, two items must be present. First, there must be a retail sale or a use in Maryland; and secondly, the object of the sale or use must be tangible personal property or a taxable service.
In Maryland a buyer who does not pay the sales or use tax to the vendor must pay the sales and use tax that is due. This sales or use tax is paid with the return that covers the period in which the purchase was made. To the extent that you pay another state a tax on the purchase of tangible personal property or a taxable service, the tax does not apply to use of the property or service in Maryland. If the tax paid to another state is less than Maryland's sales and use tax, you as a purchaser, must pay the difference.