Frequently Asked Questions for Businesses

Answers to frequently asked questions about the admissions and amusement tax can be found in our business tax tips.

The tax is imposed on the entire price whether paid in the form of money, promises, barter or anything else of value. It includes the amount of liabilities assumed by the buyer, the value of services performed for the vendor and, except for federal food stamps, the face value of any coupon for which the vendor can get reimbursement from another source. The taxable price is not reduced for any expense or cost for labor or service rendered, material used or any property sold except as explained below.
The taxable price may be reduced by separately-stated charges for installation, professional services, interest payments and delivery services. Additionally, the tax does not apply to consumer excise taxes, deposits, cash discounts and mandatory gratuity charges on food and beverage sales for groups of ten or fewer. Reductions to the taxable price must be made known to the buyer by documentary evidence in existence at the time of the sale. However, if these charges are included in a lump-sum price with no separate statement, the tax must be collected on the entire amount of the sale.
The sales and use tax is applied to the full price of the cigarettes without any deduction for tobacco taxes which may have been paid on the cigarettes.
Yes. For an interest charge to be deductible, it must be for credit extended to the buyer. Interest paid by the seller and re-billed to the buyer does not qualify. No part of a timely lease or rental payment may be treated as a deductible interest charge.
No. A store coupon is not included in the taxable price unless the vendor can get reimbursement from another source. Manufacturers' coupons, for which a store can get reimbursement, are included in the taxable price, however.
Warranty, maintenance, service agreement and insurance charges in connection with taxable sales are also taxable if the vendor requires them to be purchased or they are automatically included in the price of the merchandise. However, if the sale could be completed without paying these charges, they are not taxable.
Separately stated shipping charges are not taxable; however, handling charges are a part of the taxable price. Therefore, when the charges are combined, the shipping charge loses its exemption and the entire amount is subject to the tax.
Are all labor charges exempt? No. The tax applies to fabrication labor charges. Fabrication or assembly labor charges are taxable even if the customer provides the materials.
The restoration of used property to its original condition or usefulness is repair, which is not taxable. The creation or completion of a new or different item is fabrication, which is taxable.
Under Maryland law, an out-of-state vendor must register with the Maryland Comptroller's Office to collect the tax if the vendor has sufficient presence or "nexus" in Maryland. For more information, see Nexus Information.

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 (P.L. 86-272), 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 (P.L. 86-272):

  • 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 (such as trucks with driver-salesmen) from which direct sales are made.
For more information, see Administrative Release No. 2, Interstate Commerce Tax Act - Domestic and Foreign Corporations - Nexus Requirements - Apportionment of Corporate Net Income

Updated November 25, 2019

Maryland Law and Regulation on Out of State Vendors

Under Maryland law, a person who engages in the business of an out-of-state vendor must register with the Maryland Comptroller, collect and pay sales and use tax, and file Maryland sales and use tax returns. A person engages in the business of an out-of-state vendor if the person:

  1. Permanently or temporarily maintains, occupies, or uses any office, sales or sample room, or distribution, storage, warehouse, or other place for the sale of tangible personal property or a taxable service directly or indirectly through an agent or subsidiary;
  2. has an agent, canvasser, representative, salesman, or solicitor operating in the state for the purpose of delivering, selling, or taking orders for tangible personal property or a taxable service;
  3. Enters the state on a regular basis to provide service or repair for tangible personal property;
  4. Regularly uses the person's vehicles to sell or deliver tangible personal property or a taxable service for use in the State; or
  5. Sells tangible personal property or taxable services for delivery in the State, if, during the previous calendar year or the current calendar year, the person satisfies either of the following criteria:
    1. The person's gross revenue from the sale of tangible personal property or taxable services delivered in the State exceeds $100,000; or
    2. The person sold tangible personal property or taxable services for delivery into the State in 200 or more separate transactions.

See Md. Code Ann., Tax-Gen. §§ 11-701(b)(2)(i)-(b)(2)(iii) and COMAR 03.06.01.33(B)(4)-(5).

Engaging in the Business of an Out-of-State Vendor

The Comptroller's Office interprets Section 11-701(b) as broadly as is permitted under the United States Constitution.

The Comptroller considers the phrase "on a regular basis" as used in § 11-701(b)(2)(ii) to be met if a vendor, such as a furniture or appliance dealer, provides such service or repair as a customary, usual or normal course of business.

Section 11-701(b)(2)(ii) does not define the word "service" in the phrase "provide service or repair for tangible personal property." The Comptroller's Office, relying on a dictionary definition of "service," interprets the word to mean "installation, maintenance, or repairs provided or guaranteed by a dealer or manufacturer." See, for example, the American Heritage Dictionary, Second College Edition (1985).

A dealer or manufacturer that regularly installs, or who performs maintenance for, tangible personal property such as furniture or appliances is engaged in the business of an out-of-state vendor within the meaning of Section 11-701(b)(2)(iii).

No minimum number of service or repair visits is required to meet the definition. If it is the vendor's policy to provide service or repair for tangible personal property, and the vendor in fact provides such services or repairs during the audit period, these services or repairs will be regarded as regular. On the other hand, any services or repairs that are provided on a discretionary and infrequent basis will not be regarded as regular.

The Comptroller's Office will examine all relevant information in making a determination about whether a person engages in the business of an out-of-state vendor under § 11-701(b)(1-4). This information includes advertising materials, promotional literature, websites, representations made to prospective customers before sale, whether the vendor routinely employs service or repair personnel or regularly contracts for such services or repairs, and the vendor's description of its business operations as contained in business documents and submissions to government agencies.

Sales of Tangible Personal Property or Taxable Services for Delivery into Maryland

The nexus requirements contained in COMAR 03.06.01.33(B)(5) became effective October 1, 2018. Out-of-state vendors with more than $100,000 in sales or at least 200 separate transactions into Maryland must register and collect sales tax. The Comptroller's Office has published guidance for out-of-state vendors to determine if registration is required.

Guidance on Sales of Tangible Personal Property or Taxable Services for Delivery into Maryland

Sales and Use Tax Alert - Issued September 2018

Registration

If you are required to register with the Maryland Comptroller's Office, a Maryland Combined Registration Application can be found here.

One-Time Events or Shows

If you are going to participate in a one-time event or craft show involving the sale of tangible personal property in Maryland, you may not need to register with Maryland. However, you will need to obtain a Temporary Sales & Use Tax License. Information on obtaining a Temporary Sales & Use Tax License can be found here.

Closing a Sales and Use Tax Account

If you have determined that you no longer have nexus with the State of Maryland, are not required to file Maryland sales and use tax returns, and do not need to retain your account to claim a resale exemption, you can close your Maryland sales and use tax account by filing the Maryland Sales and Use Tax Final Return Form. Form 202FR is available here.

Contact Us

If you have any questions on Maryland's law and regulations on out-of-state vendors, please contact the Comptroller's Office at remotesellers@marylandtaxes.gov.

If the organization has a location in Washington, D.C, Virginia, West Virginia, Pennsylvania, or Delaware, it may qualify for an exemption. You should complete the Sales and Use Tax Exemption Certificate Application and submit it to the Maryland Comptroller's Office for consideration.
Yes. Under the Maryland sales and use tax law, each rental or lease payment is treated as a sale and is subject to the 6 percent tax rate. An 11½ percent tax is imposed on short-term passenger car and recreational vehicle rentals, while certain short-term truck rentals are subject to an 8 percent tax.
A resale certificate is a statement you produce and give to your supplier, stating that the merchandise you are purchasing is going to be resold or will become a part of a product that will be resold. To provide this statement, you must have a valid sales and use tax license. Although there is no specific form for a resale certificate, it must include a signed statement that the purchase is intended for resale, the purchaser's name and address, and the purchaser's Maryland sales and use tax license number. See a sample resale certificate. For more information, see Purchases for Resale or Business tax Tip #4, If You Make Purchases for Resale.
Yes and no. If you are purchasing materials that will be incorporated into the realty of a federal, state, or local government agency, you are not entitled to an exemption from the sales and use tax. You should pay the tax to your suppliers at the time of purchase. However, if you are purchasing merchandise for resale in its original form to a governmental entity, you may obtain a sales and use tax license that will enable you to issue resale certificates to your vendors. Equipment and tools purchased for your use in fulfilling a contract is taxable even if ownership will pass to the governmental entity after use. For more information, see Business Tax Tip #18, Real Property Contractors and Maryland Taxes.
If you are making purchases of products for resale as tangible personal property or incorporation into a product that will be sold as tangible personal property, you are required to obtain a sales and use tax license for the collection and remittance of the sales tax. The license authorizes a person to issue resale certificates to vendors containing the purchaser's sales and use tax account number. For more information, see Business Tax Tip #4, If You Make Purchases for Resale.
The 2007 Special Session of the Maryland General Assembly enacted legislation providing for two tax-free periods beginning each year. Listed below is information pertaining to each tax-free period.

Shop Maryland- Tax-Free Week on Clothing and Footwear, Excluding Accessory Items

Beginning in calendar year 2010 and each year thereafter, there will be a one week tax-free period for back-to-school shopping in Maryland during August in which the sales and use tax does not apply to the sale of any items of clothing or footwear, excluding accessory items, if the taxable price of the item of clothing or footwear is $100 or less. The 2016 tax free period will occur the week of August 14-20. Accessory items that are not exempt from the sales and use tax during the tax-free week include jewelry, watches, watchbands, handbags, handkerchiefs, umbrellas, scarves, ties, headbands, and belt buckles.

Shop Maryland- Tax-Free Weekend on Energy Star Products

Beginning in calendar year 2011 and each year thereafter, there will be a tax-free three-day weekend during February in which the sales and use tax will not apply to the sale of any Energy Star Product listed below. The 2017 tax free weekend will occur the weekend of February 18-20. Energy Star Product means an air conditioner, clothes washer or dryer, furnace, heat pump, standard size refrigerator, compact fluorescent light bulb, light-emitting diode (LED) light bulbs, dehumidifier, programmable thermostat or boiler that has been designated as meeting or exceeding the applicable Energy Star efficiency requirements developed by the U.S. Environmental Protection Agency and the U.S. Department of Energy. Please note that under Energy Star requirements, no dryer has an Energy Star rating and therefore dryers do not currently qualify for this tax-free period.

For more details, see our Sales and Use Tax Alert on Tax-Free Periods.
The church or organization is required to produce a copy of its exemption certificate issued by the Comptroller's Office. You should make a note of the exemption number and its expiration date on your copy of the invoice. You may not accept an exemption certificate issued by another jurisdiction as evidence that the church or organization is exempt in Maryland. You may also verify the validity of an exemption number online. For more information, see Business Tax Tip #6, Retail Sales Involving Exemption Certificates.
When purchasing manufacturing machinery and equipment, you need only provide the seller with a certification letter that the equipment will be used predominantly in a production activity. The certification should be retained by the seller with the record of sale. Items purchased which are consumed during the manufacturing process may be purchased tax free by issuing vendors a resale certificate. Manufacturers claiming exemption on the purchase of utilities to run the exempt equipment must complete Form ST 206. You can also obtain Form ST 206 by contacting the Comptroller's Taxpayer Service Division at 410-260-7980, or toll-free 1-800-638-2937 from elsewhere in Maryland, Monday - Friday, 8:00 a.m. - 5:00 p.m. EDT.
Yes. Effective January 3, 2008, as a vendor, you may assume and absorb all or any part of the sales and use tax on a retail sale and pay that tax on behalf of the buyer. You must, however, continue to separately state the tax from the sales price at the time of sale to the purchaser. If you absorb all or any part of the tax on the sale, you must pay the tax with the return that covers the period in which you made the sale.
To change the name of your business, you must first report the change to the Maryland Department of Assessments and Taxation. (SDAT) link to by submitting a completed Trade Name Amendment or Cancellation Form with SDAT.

Next, send us a letter or e-mail confirming the new business name and attach a copy of your completed Trade Name Amendment, Cancellation Form or Amended Articles of Incorporation.

Please include the following in your correspondence:

  • Former business name
  • New business name
  • Business address and telephone number
  • Nine-digit federal employer identification number (FEIN) or eight-digit Maryland central registration number


You can contact us by e-mail at taxhelp@marylandtaxes.gov or write to:

Comptroller of Maryland
Revenue Administration Center
Taxpayer Identification
Annapolis, Maryland 21411

To report other business-related changes with SDAT, see SDAT's Forms and Applications
Employer Withholding FAQs

Find answers to questions regarding Maryland's sales and use tax with regard to out of state purchases, flea markets, alcoholic beverages and more.

Below you will find frequently asked questions concerning the Sales and Use tax.

Yes. Every time you purchase taxable tangible goods, whether in person, over the phone, or on the Internet, the purchase is subject to Maryland's 6 percent sales and use tax if you use the merchandise in Maryland. If you make a tax-free purchase out of state and need to pay Maryland's 6 percent use tax, you should file the Consumer Use Tax Return.

When you purchase goods from out-of-state businesses, they are not required to collect Maryland's sales and use tax unless they have a physical location, or deliver services, in Maryland. For more information, see Maryland's Sales and Use Tax

No. A store coupon is not included in the taxable price unless the vendor can get reimbursement from another source. Manufacturers' coupons are included in the taxable price since a store can obtain a reimbursement from the manufacturer.

For example, if you had a Mars grocery store coupon that was redeemable only at a Mars store - and not Food Lion, Giant or any other food store - the coupon would not be included in the taxable price. On the other hand, if you had a Welch's Grape Juice coupon that you could use in any store, then that coupon would be included in the taxable price.

No. Energy Star-rated clothes washers, refrigerators and air conditioners sold in Maryland are not exempt from the Maryland sales and use tax.

There is a tax-free three-day weekend during which the state sales tax will not apply to the sale of any Energy Star Product listed below, or solar water heater. The tax-free weekend for 2013 will occur the weekend of February 16, 2013, through February 18, 2013.

Energy Star Product means an air conditioner, clothes washer or dryer, furnace, heat pump, standard size refrigerator, compact fluorescent light bulb, dehumidifier, or programmable thermostat that has been designated as meeting or exceeding the applicable Energy Star Efficiency requirements developed by the U.S. Environmental Protection Agency and the U.S. Department of Energy.

In general, food sales are subject to Maryland's 6 percent sales and use tax unless a person operating a substantial grocery or market business sells the food for consumption off the premises and the food is not a taxable prepared food. A grocery or market business is considered to be "substantial" if the sales of grocery or market food items total at least 10 percent of all food sales.

For more information, see Sales of Food

No. The Maryland sales and use tax does not apply to the sales of cars or boats since those items are already subject to titling taxes. Sales of motor vehicles are subject to the Maryland motor vehicle titling tax which is administered by the Maryland Motor Vehicle Administration. Boat sales are subject to a boat titling tax which is administered by the Maryland Department of Natural Resources. On the other hand, the sales and use tax does apply to car and boat rentals, under different tax rates. An 11.5 percent tax is imposed on short-term passenger car and recreational vehicle rentals. Certain short-term truck rentals are subject to an 8 percent tax.

It depends. Charges for warranties, maintenance, service agreements and insurance are taxable if the buyer is required to purchase them or they are already included in the price of the merchandise. However, if the sale could be completed without paying these charges, then the charges are not taxable.

Private vendors or franchisees selling on military bases, or other United States Government properties, must charge the sales tax on all sales of tangible personal property and taxable services statutorily subject to the tax. The tax must be charged on sales to military and other Government personnel as well as civilians. There is an exemption from the tax for sales made at a vending machine facility operated under the Maryland Vending Program for the Blind that is located on property on military bases.

Sales made by the United States Government, or any of its agencies, on Government property are exempt from the sales and use tax, regardless of whether the purchasers are military and Government personnel or civilians.

For example, sales of food by a fast food vendor on a military base are subject to the tax if the vendor or franchisee is ABC Company. The same sales made on a military base where the vendor or franchisee is the United States Government, or an agency of the Government, are not subject to the tax.

Below you will find frequently asked tax questions concerning out of state purchases.

Basically, yes. Maryland does, however, grant a credit for the sales tax paid to another state up to the amount of the Maryland tax. In addition, a 10 percent depreciation allowance may be taken for each full year the property is used by the purchaser before being brought to Maryland.

Maryland grants a credit for sales tax paid to another state up to the amount of Maryland's six (6%) percent sales and use tax liability.

For example, if you paid a four (4%) percent sales tax to another state, you would be liable only for the difference, or two (2%) percent Maryland sales and use tax when you brought the property into Maryland. If you paid a six (6) or higher percent sales tax to another state, you would not be liable for Maryland sales and use tax when you brought the property into Maryland.

Yes. However, you may claim a ten (10%) percent depreciation allowance for each full year you used the property before you brought it to Maryland. Only the depreciated value is subject to tax.

The tax applies only to the cost of materials and purchased fabrication services, not to the full market value of the goods. The value of your labor is not taxed.

Below you will find frequently asked tax questions concerning flea markets.

Yes. Maryland law requires that vendors display their licenses at any location where sales are made. This will save you valuable selling time because representatives of the Comptroller's Office do not have to ask for your registration number.

The tax is on the transaction or sale and not on the property sold. The same item will generate tax each time it is sold unless it is specifically sold for resale.

Yes. Nonprofit organizations must collect tax on merchandise they sell, even if the goods are donated to them. Private individuals must also collect tax even if they plan to donate the proceeds to a nonprofit organization. Private individuals are not eligible for a sales and use tax exemption certificate. Sales by religious organizations and sales of food by volunteer fire companies and veterans' organizations are exempt.

Always collect tax on sales to other dealers unless they present you with a resale certificate bearing their Maryland sales tax registration number. However, out-of-state dealers who are not required to collect the Maryland tax may use their out-of-state sales tax registration number on a resale certificate to purchase antiques and used collectibles. Dealers from states that do not impose a sales tax may provide a valid trader's license or comparable document. Resale certificates are not valid for cash, check or credit card sales of less than $200 unless the product is delivered to the customer's place of business.

Yes. Effective January 3, 2008, a vendor may assume and absorb all or any part of the sales and use tax on a retail sale and pay that tax on behalf of the buyer. The vendor must, however, continue to separately state the tax from the sales price at the time of sale to the purchaser. If the vendor absorbs all or any part of the tax on the sale, the vendor shall pay the tax with the return that covers the period in which the vendor makes the sale.

Below you will find frequently asked tax questions concerning food and beverages.

Yes. However, when calculating if a business meets the 10 percent threshold for a substantial grocery or market business, you may not include sales of single servings, heated or prepared food or sales to be consumed on the premises.

Yes. A caterer serving food at a customer's premises must collect the tax on the food sold. A caterer must collect the tax in this situation even if the caterer also conducts a substantial grocery or market business.

Yes. Sales of food to patients in a hospital when the food charges are included in the regular room rate are exempt. Sales of food and beverages on vehicles operating in interstate commerce are exempt. In addition, the tax does not apply to a sale of crabs for consumption off the premises where sold. Sales of seafood to be consumed off the premises where sold are also exempt if the seafood is not prepared for immediate consumption.

No. For sales and use tax purposes, soft drinks, bottled water, alcoholic beverages, candy and confectionery are not "food." The sale of any of these items is, therefore, not entitled to any of the exemptions for sales of food, including the exemptions for sales of food by volunteer fire companies and veterans organizations. Neither water nor ice is food, although they may be treated as food when sold as components of food.

The tax does not apply to eligible food purchased with federal food stamps. Food stamp eligible food encompasses everything that is considered food for sales and use tax purposes, plus soft drinks, candy, confectionery, water, ice and otherwise taxable and prepared foods.

If a customer purchases both taxable and nontaxable food stamp eligible food with a combination of food stamps and cash, credit card or debit card, the vendor must apply the food stamps to the eligible taxable items first, and then any remaining food stamps to the eligible nontaxable items. After application of the food stamps, the balance of the eligible taxable items paid for with cash, credit card, or debit card is subject to tax.

Your sales and use tax registration number is an eight-digit number that has been assigned to your business. You'll find your registration number on each sales and use tax return we send you and on your sales and use tax license.

You must clearly document the reason for all tax-exempt sales. Otherwise you will be held responsible for uncollected tax, plus penalty and interest. You should establish procedures to obtain valid resale certificates at the point of sale, and review your files periodically for accuracy and completeness.

Make certain that you do not allow resale exclusions on cash, check or credit card sales of less than $200 when you do not deliver the goods sold directly to the buyer's retail place of business.

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 for audit purposes.

No. Retailers licensed and remitting taxes in other states may apply to the Maryland Comptroller's Office for a refund.

However, an out-of-state vendor who has been issued a temporary permit to collect the Maryland tax may use the number on that permit to make tax-free purchases for resale at the show for which the permit was issued. Temporary permits bear six-digit numbers and are issued by the comptroller's Special Events Section.

No. If you frequently deal with the same supplier, you may provide that supplier with a blanket resale certificate stating that all purchases are for resale. Then all you have to do is give the supplier your sales and use tax registration number.

No. Exemption certificates are issued by the Comptroller of Maryland to qualifying nonprofit organizations and government agencies to make purchases for their own use. The exemption certificate is a wallet-sized card bearing the holder's eight-digit exemption number. Certificates issued to nonprofit organizations have a specific expiration date, presently September 30, 2017 for religious, educational and charitable organizations, cemeteries, credit unions, and volunteer fire companies or rescue squads and September 30, 2017 for certain veterans organizations and their auxiliaries and units. Certificates issued to government agencies have no expiration date. Organizations and government agencies presenting exemption certificates are exempt from the sales and use tax on purchases of materials and supplies to carry out their work. On the other hand, a resale certificate allows a person to make tax-free purchases for resale, not for use.

Although there is no specific form for a resale certificate, it must include a signed statement that the purchase is intended for resale, the purchaser's name and address, and the purchaser's Maryland sales and use tax registration number.

In a typical transaction, you would sell merchandise to a vendor who is not registered to collect Maryland sales and use tax. The unregistered vendor asks you to deliver the merchandise to a customer in Maryland. In this case, you must:

  • Require the vendor to obtain a Maryland sales and use tax license and provide a valid resale certificate; OR
  • Charge the vendor the tax based on the amount of the sale. You are responsible for collecting or documenting the tax on your sale to the vendor.

Business Licenses FAQs
Tobacco FAQs
Motor Fuel Quality Control FAQs
EFT FAQs