Maryland Sales & Use Tax Guide

SALES TAX

  • You must file a Sales & Use Tax Report even if you have no taxable sales and owe no tax. You can file by calling (410) 974-3453 by the due date (21st day following the close of a quarter).
  • If your sales tax liability is more than $750, you must submit your sales tax coupon, along with your payment, monthly. If your sales tax liability is less than $750, you can submit your tax quarterly.
  • If you have a place of business, employees, or sufficient other contacts with a state, you are required to collect sales tax on sales to residents of that state.
  • A business must collect sales tax for sales in any state in which it has an agent or representative that delivers, sells, takes orders, or provides service in that state.

 

EXEMPTIONS

  • You do not have to collect tax on most items you sell that will be sold again. You will need to keep a resale certificate, signed by the buyer and bearing his Maryland registration number. If one of your customers makes frequent purchases for resale, you should keep a blanket resale certificate on file.
  • Resale Certificate – certifies that materials purchased tax free will be resold or incorporated into tangible personal property or a taxable service that will be sold.
  • Materials that will be incorporated in property to be produced for sale are not subject to tax. You should use a resale certificate to document the tax-free sales of these raw materials.
  • You should keep resale certificates on file as part of your business records. You must be able to match your sales records with the appropriate resale certificates and satisfy an auditor that you were not required to collect and report the tax on a particular sale.
  • You are not required to collect tax on articles that you delivered by common carrier to an address outside the state of Maryland if you have no reason to believe the articles are intended for use in Maryland. Your records should clearly demonstrate that an item was delivered out-of-state.
  • If you sell to a customer in another state and you do not have a place of business or employees in that state, you are not required to collect Maryland sales tax or sales tax of the state in which the customer resides (unless you deliver the products to the customer by means other than a common carrier or the customer takes possession of the products in Maryland).
  • Maryland sales and use tax does not apply to sales of machinery and equipment used in production activities, sales of property for consumption in production activities or sales of property for resale or incorporation as a material or part of other tangible personal property produced for sale.

 

USE TAX

  • If you purchased property tax-free in another state and bring the property into Maryland for use, you owe Maryland sales and use tax on the purchase.
  • Maryland’s 6% sales and use tax applies to all tangible property that you possess and use in Maryland, no matter where you purchased it. Items are taxable in Maryland to the extent that they were not taxed at the place of purchase.
  • Sales and use tax applies to purchases of goods outside of Maryland if the purchase would have been subject to sales and use tax if made in Maryland. Examples: Computers, Office Supplies, Copiers, Office Furniture.
  • If you would pay tax on the purchase if you made it in Maryland, you should pay use tax on the same item if you purchased it untaxed outside of Maryland.
  • Property that you intend to resell, or property that you will incorporate into something you manufacture to sell, is exempt from the use tax. To receive this exemption, you must give the vendor a resale certificate.
  • Out-of-state purchases are recorded on Line 3 of your sales and use tax report.
  • If your average tax liability for out-of-state purchases is more than $100 per month, you are required to report and remit the tax every month. If your tax liability is less than $100 per month, you may file on a quarterly basis.
  • If you paid sales tax on a purchase but it is less than the 6% Maryland sales tax, you must pay the difference between the tax paid and the 6% Maryland tax liability.