Sales and Use Tax 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.

Sales and Use Tax FAQs

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

1. I recently bought a sofa in Delaware where there is no sales tax and arranged to have the sofa delivered to my home in Maryland. Do I have to pay Maryland sales tax on the purchase?
2. Are store discount coupons included in the taxable price?
3. Are sales of Energy Star appliances exempt from the sales tax?
4. How is food taxed in Maryland?
5. Does the sales tax apply to sales of cars and boats?
6. Are warranty charges taxable?
7. Are purchases made on military bases subject to the sales tax?

Sales and Use Tax Answers

1. I recently bought a sofa in Delaware where there is no sales tax and arranged to have the sofa delivered to my home in Maryland. Do I have to pay Maryland sales tax on the purchase?

   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

2. Are store discount coupons included in the taxable price?

   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.

3. Are sales of Energy Star appliances exempt from the sales tax?

   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 period for these products begins on the Saturday immediately preceding the third Monday in February.

   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.

4. How is food taxed in Maryland?

   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

5. Does the sales tax apply to sales of cars and boats?

   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.

6. Are warranty charges taxable?

   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.

7. Are purchases made on military bases subject to the sales tax?

   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.

Out of State Purchases FAQs

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

1. Is the tax on out-of-state purchases computed the same way as the tax on sales inside Maryland?
2. What if I pay sales tax to another state?
3. Do I have to pay tax on used property I bring into Maryland?
4. Does the tax apply to self-manufactured goods I bring into Maryland?

Out of State Purchases Answers

1. Is the tax on out-of-state purchases computed the same way as the tax on sales inside Maryland?

   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.

2. What if I pay sales tax to another state?

   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.

3. Do I have to pay tax on used property I bring 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.

4. Does the tax apply to self-manufactured goods I bring into Maryland?

   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.

Flea Markets FAQs

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

1. Do I have to display my license at a flea market?
2. Why do I have to collect the tax on used goods if they were probably taxed when new?
3. Do nonprofit organizations have to collect tax?
4. Are sales to other dealers exempt?
5. Can I make sales on a "tax-included" basis?

Flea Markets Answers

1. Do I have to display my license at a flea market?

   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.

2. Why do I have to collect the tax on used goods if they were probably taxed when new?

   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.

3. Do nonprofit organizations have to collect tax?

   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.

4. Are sales to other dealers 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.

5. Can I make sales on a "tax-included" basis?

   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.

Food and Beverages FAQs

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

1. Are sales at a bakery considered grocery or market food items?
2. Are caterers required to collect the tax?
3. Are there any other exemptions?
4. Does "food" include everything that is edible?
5. How are federal food stamps treated?

Food and Beverages Answers

1. Are sales at a bakery considered grocery or market food items?

   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.

2. Are caterers required to collect the tax?

   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.

3. Are there any other exemptions?

   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.

4. Does "food" include everything that is edible?

   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.

5. How are federal food stamps treated?

   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.

Purchases for Resale FAQs

Below you will find frequently asked tax questions concerning purchases for resale.

1. What is my sales and use tax registration number?
2. How can I protect myself from unnecessary tax liabilities?
3. What should I do with resale certificates my customers give me?
4. May I accept resale certificates from unlicensed out-of-state customers?
5. Must I fill out a new resale certificate every time I make an eligible purchase?
6. Is a resale certificate the same thing as an exemption certificate?
7. What information should be included on a resale certificate?
8. What about third-party drop shipments?

Purchases for Resale Answers

1. What is my sales and use tax registration number?

   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.

2. How can I protect myself from unnecessary tax liabilities?

   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.

3. What should I do with resale certificates my customers give me?

   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.

4. May I accept resale certificates from unlicensed out-of-state customers?

   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.

5. Must I fill out a new resale certificate every time I make an eligible purchase?

   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.

6. Is a resale certificate the same thing as an exemption certificate?

   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. 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.

7. What information should be included on a resale certificate?

   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.

8. What about third-party drop shipments?

   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.