Maryland Sales And Use Tax

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Do You Need To Register To Collect Sales Tax

Sales And Use Tax Deadlines In Maryland Moved Due To Coronavirus

If you sell, lease, distribute, or rent tangible personal property to customers in Virginia, or otherwise meet the definition of a dealer, and have sufficient activity in Virginia, you have nexus as defined in Va. Code § 58.1-612, and must register to collect and pay sales tax in Virginia.

  • In-state dealers: generally individuals and businesses making sales with, or at, one or more physical locations in Virginia must register to collect sales tax as an in-state dealer.
  • Out-of-state dealers: generally individuals and businesses located outside of Virginia, but with sufficient physical or economic presence to establish nexus in Virginia, must register to collect sales tax as an out-of-state dealer. Starting July 1, 2019, this includes remote sellers or online retailers that make more than $100,000 in annual Virginia gross sales or 200 or more transactions to Virginia customers. Learn more about economic nexus requirements for remote sellers.
  • that have economic nexus in Virginia must register to collect and pay sales tax starting July 1, 2019. Generally, businesses without a physical location in Virginia that meet the economic nexus threshold should register as an out-of-state dealer, and businesses with a physical location should register as an in-state dealer. Marketplace facilitators must indicate that they are a marketplace facilitator when registering. Learn more.
How to register

You can register online or by mail. Use our checklist to make sure you have what you need.

Frequently Asked Questions For Business Taxpayers

The Maryland corporation income tax applies to every Maryland corporation and every other corporation that has a nexus with Maryland. Nexus indicates a taxable connection between a corporation and a taxing authority. If a corporation conducts business activity within Maryland and exceeds the provisions of U.S.C.A. Title15, Section 381 of the Interstate Commerce Tax Act , it has a nexus and must file a corporation income tax return, using Form 500.

The following list includes some in-state activities which generally create nexus and are outside the protection of U.S.C.A. Title 15 Section 381 :

  • Maintaining a business location in Maryland, including any kind of office.
  • Ownership or use of property in Maryland, real or personal, whether the property is rented office space or equipment used in the manufacture and distribution of goods.
  • Employees soliciting and accepting orders in Maryland.
  • Installation or assembly of the corporation’s product.
  • Maintaining a stock of inventory in a public warehouse or placement of the corporation’s inventory in the hands of a distributor or other non-employee representative.
  • Sales persons making collections on regular or delinquent accounts.
  • Technical assistance and training with Maryland offered by corporate personnel to purchasers or users of corporate products after the sale.
  • Corporate personnel repairing or replacing faulty or damaged goods.
  • Mobile stores in Maryland from which direct sales are made.

Registration

One-Time Events or Shows

Irs Announcements On Health Plans Amid Covid

The Internal Revenue Service advised that high-deductible health plans can pay for 2019 Novel Coronavirus-related testing and treatment, without jeopardizing their status. This also means that an individual with an HDHP that covers these costs may continue to contribute to a health savings account .

In Notice 2020-15 , posted on IRS.gov, the IRS said that health plans that otherwise qualify as HDHPs will not lose that status merely because they cover the cost of testing for or treatment of COVID-19 before plan deductibles have been met. The IRS also noted that, as in the past, any vaccination costs continue to count as preventive care and can be paid for by an HDHP.

This notice applies only to HSA-eligible HDHPs. Employees and other taxpayers in any other type of health plan with specific questions about their own plan and what it covers should contact their plan.

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I Received A Maryland Sales Tax Audit Notice What Should I Do

Businesses that receive a sales tax audit notice need to consider the following questions:

  • If youdo not have sales tax audit experience, how can you trust that the State’s auditor abides by the rules and follows proper procedures?
  • How will you know when to provide documents or when to push back?
  • Do you thoroughly understand your sales and use tax areas of exposure?
  • Controlling the audit is paramount to limiting exposure and shaping the results. Are you confident in doing that on your own?

Unless you can confidently answer these questions, hiring a professional is most likely to be the best option.

Contact usto learn how our sales tax professionals can give you the peace of mind and confidenceyou will need during your audit.

Visit our resource pages for more information to help you make critical decisions during your Maryland sales and use tax audit.

Sourcing And Multiple Points Of Use

Supplier Network

The revised guidance notes that the retail sale of a digital code or a digital product is presumed to be made in the state in which the customer tax address is located. The guidance provides a hierarchy for determining the customer tax address, including:

  • The vendors business location if the digital code or product is received by a buyer at that location,
  • The buyers primary use location if it is known by the vendor, or
  • The location of receipt by the buyer or the buyers donee if identified by the buyer and known to the vendor and maintained in the ordinary course of the vendors business.

In one example, the purchaser is headquartered in Maryland, but its purchase order indicates the that the particular purchaser is Buyer’s division located in Colorado and Buyer’s purchase order further contains a Ship To address for the Buyer’s division located in Colorado. The purchasers primary use location is not known by the vendor. In this circumstance, although the SaaS transaction does not qualify as customized software, the transaction is not considered a retail sale in Maryland and the vendor is not required to collect and remit sales and use tax.

Observation: The guidance does not allow purchasers to remit use tax based on their in-state use, but instead requires sellers to collect tax based on written representations from the purchaser .

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What Do Sales And Use Taxes Apply To

Goods – All goods are subject to sales and use tax. This includes food, clothing, jewelry, vehicles, furniture, and art. However, there are exceptions, including:

  • Agricultural Products Items sold/bought are not taxed if they are bought by a farmer and are being used for an agricultural purpose. Read the Law: Md. Code, Tax-General § 11-201
  • Food Sales Food items that are sold by a substantial grocery or market business for consumption off the premises are not considered taxable prepared food. However, food items that are prepared for consumption on the grocers premises or are packaged for carry out are considered prepared food and are subject to a 6% sales tax. Read the Law: Md. Code, Tax-General § 11-206
  • There are additional exemptions. Read the Law: Md. Code, Tax-General Title 11, Subtitle 2

Services – Only services listed in the law are subject to sales and use taxes in Maryland. These services include, but are not limited to:

  • Manufacturing or producing personal property
  • Transportation of electricity or natural gas
  • Commercial cleaning and janitorial services
  • Certain telecommunications services

Rates – Maryland taxes various goods and services at different rates. A 6% tax rate applies to most goods and services. However, vehicle rentals and the sale of alcoholic beverages are taxed at different rates.

Who Is Responsible For Collecting And Filing Sales And Use Taxes

The vendor must collect and file sales tax. A vendor is a person in the retail business, who sells finished goods to consumers. Anyone who sells taxable services to consumers must also collect and file sales tax.

Read the Law: Md. Code, Tax-General § 11-701

A vendor includes entities defined in the law as marketplace facilitators. To illustrate what a marketplace facilitator is, consider Amazon. Many goods sold on Amazon.com are not sold by Amazon, but by third party sellers. Amazon handles payment and delivery of the product. Maryland law requires marketplace facilitators to collect sales tax at the time of purchase.

Use tax must be filed by any consumer who makes a tax-free purchase in another state.

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Sales Tax Exemptions And Exceptions

Exemption Certificates

In many cases, in order to sell, lease, or rent tangible personal property without charging sales tax, a seller must obtain a certificate of exemption from the buyer. The sales-for-resale exemption prevents tax from being charged multiple times on the same item. The sales tax should be applied on the final retail sale to the consumer. The exemption prevents the tax being applied on goods as they are distributed before being sold at retail.

A dealer who makes a sale without charging applicable sales tax must retain a copy of the exemption certificate on file to substantiate the sale was tax exempt under the law.

Virginia Sales and Use Tax Dealer Lookup

If your business is registered as a retail sales tax dealer with us, you can use the Virginia Sales and Use Tax Dealer Lookup through your online business account to verify that a business providing you with a sales tax exemption certificate is currently registered as a retail sales tax dealer in Virginia. If you dont have an account, youll need to create oneto use the tool. You can also call Customer Services at to check.

How To Get A Maryland Sales And Use Tax License:

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You can open a sales tax account and acquire the necessary permit with Maryland’s Central Registration Application , which also enables you to apply for all other necessary state permits and tax accounts. Depending on what permits you need, you may be required to use the paper application and not the interactive web application.You can contact the Office of the Comptroller of Maryland for help with your sales tax account by calling toll-free 1-800-638-2937 or emailing

Also Check: File State And Federal Taxes For Free

What Is Sales And Use Tax

Sales tax is a state tax on the purchase of most tangible personal property and on some services in Maryland. Tangible personal property is property that can be physically touched, manufactured, and moved. In Maryland, it also includes electricity, natural gas, and the right to stay/rent a room .

Read the Law: Md. Code, Tax-General §11-101

Use tax applies when a purchase of tangible personal property is made outside the state of Maryland. If the individual makes an out-of-state, tax-free purchase, then the individual must file a Consumer Use Tax Return within three months of the purchase.

Throughout this article, we will use the term goods to mean tangible personal property.

Common Exemptions From Maryland Sales And Use Tax:

  • Restoring tangiblepersonal property to its original condition or usefulness is not taxable. The creation ofa new item is a fabrication, which is taxable.
  • If you repairpersonal property, youDO NOT have to pay tax on purchases of:
  • Parts that you resell over the counter
  • Parts installed on or in customer property under mandatory maintenance contracts or
  • Components that the seller will install on property you are repairing and for which a separate charge will be made.
  • YouDO have to pay the tax on:
  • Purchases of parts and supplies included in lump-sum billing and
  • Items you use for the job, such as tools
  • , do not become a part of the repaired propertyfor example, soaps, rags, masking tape, and sandpaper.
  • Read Also: States With No Tax On Retirement Income

    Additional Sales And Use Tax Information

    For additional information about the specifics of certain types of sales rates, fees and exemptions, visit the following two sections in the sales and use tax section for businesses:

    • 1 cent on each sale where the taxable price is 20 cents.
    • 2 cents if the taxable price is at least 21 cents but less than 34 cents.
    • 3 cents if the taxable price is at least 34 cents but less than 51 cents.
    • 4 cents if the taxable price is at least 51 cents but less that 67 cents.
    • 5 cents if the taxable price is at least 67 cents but less than 84 cents.
    • 6 cents if the taxable price is at least 84 cents.
    • 1 cent if the excess over an exact dollar is at least 1 cent but less than 17 cents.
    • 2 cents if the excess over an exact dollar is at least 17 cents but less than 34 cents.
    • 3 cents if the excess over an exact dollar is at least 34 cents but less than 51 cents.
    • 4 cents if the excess over an exact dollar is at least 51 cents but less than 67 cents.
    • 5 cents if the excess over an exact dollar is at least 67 cents but less than 84 cents.
    • 6 cents if the excess over an exact dollar is at least 84 cents.

    Download our sales and use tax rate chart.

    Failure To Collect Maryland Sales Tax

    Maryland Sales Tax Guide for Businesses

    If you meet the criteria for collecting sales tax and choose not to, youll be held responsible for the tax due, plus applicable penalties and interest.

    Its extremely important to set up tax collection at the point of sale its near impossible to collect sales tax from customers after a transaction is complete.

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    Sales And Use Tax Forms

    We are no longer automatically sending you a paper coupon booklet for Sales and Use Tax returns. You can file your Sales and Use tax returns through our bFile system. If you would like to continue receiving paper coupons you can request them by e-mailing or you can mail your request to Comptroller of Maryland Revenue Administration Division P.O. Box 1829 Annapolis, MD, 21404.

    Sales & Use Tax Payment Instructions

    You can download the use tax return to report and pay the tax or file for credit if you paid sales tax in another state. Based on the date of your purchase, you must file the return by the applicable quarterly due date.The use tax form and the required payment should be mailed to: Revenue Administration DivisionAnnapolis, MD 21411

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    Types Of Digital Products Including Saas Subject To Sales Tax

    House Bill 932 provides various examples of digital products, including but not limited to: movies, videos, e-books, ring tones, audio greeting cards, video or electronic games, online newspapers, magazines and chat-room discussions, and prerecorded or live music or performances. Software was not an enumerated example in the law.

    The Comptrollers guidance provides an additional, non-exhaustive list of examples that are considered to be a taxable digital product, including items such as: online classes or instruction, access to online games, customer lists, medical records, design files, models and templates, photographs, and graphics and artwork. This list also includes a sale, subscription or license to access content online and a sale, subscription or license to use a software application.

    Under a section addressing Software, the Comptrollers guidance indicates that the sale of canned or commercial off-the-shelf software is a digital product subject to the Maryland sales and use tax if obtained electronically by the buyer. The sale of software as a service is also, per the guidance, subject to Maryland sales and use tax as a digital product.

    KPMG observation

    How To Get A Maryland Sales And Use Tax License

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    In Maryland, most businesses are required to have a sales tax permit. This means that, if you are considering opening a new business or are beginning to make sales in Maryland for the first time, you will need to determine your business’ permit requirements. The good news is that you can get a Maryland Sales and Use Tax License and be ready to do business 2 weeks after you submit your application. This guide will help you learn how!

    Contents

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    Filing A Combined Registration Application

    The Maryland Comptrollers Combined Registration Application is a one-stop method for registering a variety of Maryland tax and insurance accounts. It can be filed online for new businesses using . You can also download a Combined Registration Application, or obtain a copy by visiting any of the Comptrollers local offices. A combined Registration Application can assist with registering the following tax accounts:

    The Combined Registration Application is also an initial registration for:

    • Motor fuel tax account: If you plan to sell, use or transport any fuels in Maryland, you need this account.
    • Alcohol tax license: If you plan to manufacture, sell, distribute or store alcoholic beverages, this license is needed.
    • Tobacco tax license: You need this license if you plan to sell and/or distribute cigarettes in Maryland.
    • Transportation Network Company: You need this if you plan on operating an Uber, Lyft or Sidecar business.

    If you are a nonprofit charitable, educational and religious organization volunteer fire company or rescue squad veterans organization nonprofit cemetery company, government agency or credit union located in Maryland or an adjacent jurisdiction, you may apply for a Sales and Use Tax Exemption.

    Contest A Maryland Jeopardy Assessment

    The jeopardy assessment gives the Comptrollers Office of Maryland the right to try to collect immediately.

    Due to the jeopardy nature, the taxpayer only hasa brief time to contest the assessment and must place a security deposit to fight the issue.

    Suppose you cannot resolve the case within the agency. There is still one chance to fight your Maryland sales tax assessment – the. The Maryland Tax Court is an independent agency specializing in hearing tax disputes against the Comptroller’s office. The goal of the Tax Court is to provide an independent review and resolution for taxpayers. Like a typical court, the cases are heard by a Tax Court Judge.

    Although it is not technically a court, Maryland Tax Court behaves much like a regular judicial court. Once the petition has been filed, there is a period of discovery. Following discovery, a proceeding is scheduled, at which the judge hears testimony from witnesses and receives evidence. Following the hearing, the judge renders a decision.

    Due to its court-like nature, it is strongly recommended to have a sales tax attorney or professional on your side during a Tax Court appeal. It is critical to get evidence admitted to help the judge rule in your favor and develop the record if further appeals are necessary. This stage also provides a substantial opportunity for Taxpayer’s to get a favorable settlement instead of going to trial/hearing.

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