Maryland Sales Tax Guide 2024: Compliance, Rates, and Regulations for Businesses

Sales tax at a glance

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Maryland sales tax rates & calculations in 2023

The Maryland sales tax rate in 2023 is 6%. This comprises a base rate of 6% with no additional local rates..

Recent tax rate changes in Maryland

The Maryland statewide sales tax rate of 6% has remained the same. However, Maryland made changes regarding the taxation of cannabis. Beginning July 1, 2023, a 9% sales tax rate applies to retail sales of adult-use cannabis.

FAQs

How do you calculate Maryland sales tax?

To calculate Maryland sales tax, multiply the 6% tax rate by the purchase price. For example, on a $100 sale, the sales tax would be $6.

What’s the difference between destination-based and origin-based sales tax states?

The buyer's location determines the tax rate in destination-based sales tax states. In origin-based states, it is determined by the seller's location.

Is the Maryland sales tax destination-based or origin-based?

Maryland is a destination-based sales tax state. Sellers must charge the 6% state tax rate based on the customer's ship-to address.

Is Maryland a streamlined sales tax state?

As of 2023, Maryland is not a Streamlined Sales and Use Tax Agreement (SST) member state.

Sales tax nexus table in Maryland

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FAQs

Do I need a Maryland seller's permit if I’m only a wholesaler?

Yes, you need a Maryland seller's permit even if you only sell goods wholesale and do not make any retail sales. 

Do I need a Maryland seller's permit if I only sell temporarily in the state?

Yes, you need a temporary seller's permit in Maryland if you are making retail sales for a short period, even if you are based out of state.

Exemptions from sales tax in Maryland

Some common exempt goods in Maryland include non-prepared food sold at grocery stores, prescription and over-the-counter medicines, medical supplies and equipment, and most agricultural products and farm equipment.

Some exempt services include medical services, educational services, services provided to exempt organizations, and personal services such as haircuts and laundry.

FAQs

Are groceries taxable in Maryland?

No, most non-prepared groceries are exempt from sales tax in Maryland. Prepared foods sold at grocery stores are taxable.

Is clothing taxable in Maryland?

All clothing purchases are subject to Maryland's 6% statewide sales tax.

Are digital products taxable in Maryland?

Digital products like ebooks, streaming media, and software downloads are not subject to Maryland sales tax, effective July 1, 2022.

Is software-as-a-service (SaaS) taxable in Maryland?

No, SaaS is not taxable in Maryland, effective July 1, 2022 

Are services taxable in Maryland?

Services are generally exempt from taxes in Maryland. However, the state does tax some enumerated services like transportation, credit reporting, and commercial cleaning. However, most personal and professional services are not taxable.

Excise taxes in Maryland (alcohol, tobacco, gasoline, fuel, marijuana)

Maryland levies excise taxes on alcohol, tobacco, motor fuel, and adult-use cannabis. The rates are:

• Alcoholic beverages: 9% sales tax
• Cigarettes: $3.75 per pack
• Other tobacco: 53% of wholesale price
• Motor fuel: $.2425 per gallon per gallon
• Adult-use cannabis: 9% sales tax (beginning July 2023)
• Gasoline: 47 cents per gallon

Remote sellers in Maryland

Out-of-state sellers with no physical presence in Maryland may have economic nexus based on $100,000 in annual sales or 200 separate transactions. Remote sellers meeting either threshold must register and collect Maryland sales tax.

Collecting sales tax in Maryland

Let’s look at the steps to collect sales tax in Maryland now.

Should you collect sales tax in Maryland if you are not based in the state (Out-of-State)?

Even if you do not have a physical presence in Maryland, you may still have economic nexus based on $100,000 in annual sales or 200 separate transactions in the state. Register with the Comptroller of Maryland and begin collecting Maryland sales tax if you meet either threshold.

Out-state sellers can establish nexus in Maryland in two main ways:

• Having a physical presence in Maryland, like an office, warehouse, inventory storage, employees, etc. This automatically meets the physical nexus threshold, making you eligible to pay taxes.
• Meeting the economic nexus thresholds of $100,000 in Maryland sales or 200 transactions in the prior 12-month period. This establishes sales tax obligations even without physical presence.

Once you have a sales tax nexus in Maryland, you must apply for a sales tax license online through the Comptroller's website. This will allow you to collect and remit Maryland sales tax appropriately.

Should you collect sales tax on shipping charges in Maryland?

In Maryland, separately stated shipping charges on otherwise taxable sales are exempt from sales tax. However, handling fees are taxable. If shipping and handling charges are combined into one line item, the entire charge becomes taxable in Maryland.

So sellers should break out the shipping fees on a separate line from handling and the cost of goods on all orders shipped to Maryland buyers to keep the shipping portion tax-exempt.

Filing and paying sales tax in Maryland

All businesses registered to collect sales tax in Maryland must file returns and remit tax monthly or quarterly, depending on their assigned filing frequency. Returns must be filed even for periods with no tax due.

Maryland offers paper and online filing options through the bFile system on the Comptroller's website. Electronic payment must also be submitted by the due date to avoid penalties.

Sales tax return filing schedule and due dates in Maryland

The Comptroller of Maryland assigns filing frequencies to each business based on their sales volume. Due dates vary for monthly and quarterly filers:

Monthly:

Returns and payments are due by the 20th day of the month after the reporting period ends. For example, the January sales tax is due February 20.

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Quarterly:

For quarterly filers, returns are due on the 20th day after each calendar quarter ends:

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Filing penalties in Maryland

Late filings in Maryland incur a 10% penalty of the taxes due, plus mandatory interest charges of at least 1% per month. Total penalties will not exceed 25% of the taxes due.

When are returns due in Maryland?

Returns are due on the 20th of the month following the end of the reporting period.

For example, 2023 Q4 returns covering October - December sales are due January 20, 2024.

FAQs

What are the Maryland sales tax due dates?

Monthly returns are due by the 20th of next month. After each calendar quarter, quarterly returns are due April 20, July 20, October 20, and January 20.

I didn’t collect any Maryland sales tax during this period. Do I still need to file a return?

Yes, every business with a Maryland seller's permit must file a sales tax return for each assigned reporting period, even if they did not collect any sales tax. A $25 penalty may apply for failure to file a zero return.

Can I get an extension on filing my Maryland sales tax return?

You can submit a written request for a 6-month filing extension to the Comptroller of Maryland. However, this is only an extension to file. Any taxes owed must still be paid on time to avoid penalties.

Can I amend a Maryland sales tax return?

You can file an amended Maryland sales tax return Form SUTAMEN to correct oversights or errors from a previous return. You must pay any additional tax owed plus applicable interest and penalties.

What is the penalty for filing and paying Maryland sales tax late?

Maryland's standard late filing penalty is 10% tax due plus mandatory interest charges. If filings and payments are more than 30 days past due, an additional 25% penalty of the taxes owed may apply.

Audit & appeals process

Maryland's audit and appeals process involves the Maryland Comptroller's Office reviewing a business's records, sales invoices, bank statements, and sales tax returns to verify accuracy and completeness. 

Audits aim to ensure proper payment of sales taxes owed and detect any underpayment, but the process can feel daunting for small business owners unfamiliar with tax codes.

If an auditor finds discrepancies in tax payments during their rigorous examination, businesses can contest these findings through a formal appeals process. Navigating audits and appeals requires thoughtful preparation and a meticulous approach.

Maryland sales tax audit process

Mistakes can happen even if a business tries its best to file accurate sales tax returns. The Maryland Comptroller’s Office conducts periodic audits of companies to review if the correct amount of sales tax was reported and paid. Companies have the right to appeal the results if their audit determines issues.

Audit Process

1. The auditor contacts you to schedule the sales tax audit. They will review records for a period of up to 3 years.
2. You provide the auditor access to sales records, invoices, tax returns, bank statements, books, and other documents that show sales transactions made in Maryland.
3. The auditor thoroughly examines the information to verify sales tax was properly collected and remitted during the period.
4. The auditor summarizes the results, presenting documentation for any issues discovered and taxes owed in an audit assessment report.

What to expect during the audit?

During a Maryland sales tax audit, the auditor will review your sales tax returns, sales records, general ledger, bank statements, and source documents. You should gather all relevant documentation and know your record-keeping system to answer auditor questions.

Appeals Process

1. If you disagree with the audit results, you can submit a written appeal by letter within 30 days, along with supporting evidence.
2. The Comptroller's Office then looks at the parts of the audit you appealed.
3. Any additional conferences, hearings, meetings, or document requests will happen if needed to finalize the decision.
4. The Comptroller's Office issues its final determination and will either grant your appeal fully or partially if documentation justifies it or deny your request if not.

While getting audited and disputing results through appeals can feel uncomfortable, remember the Comptroller’s Office simply wants to ensure all Maryland businesses properly comply with sales tax laws. Guidance is available if you have questions. 

You can also contact tax experts here at Numeral if you require assistance with managing sales tax audits or appeals in Maryland.

Sales tax registration

Here are the steps for registering for sales tax in Maryland:

How do you register for sales tax in Maryland?

Follow these simple steps to register and obtain your no-cost Maryland sales tax license through the Comptroller's convenient online registration system:

• Step 1: Visit www.marylandtaxes.gov and click "Register a new business" under the Business Registration section.
• Step 2: Determine if you need to register as a sole proprietor, corporation, LLC, partnership, or non-profit organization. Select the appropriate business type.
• Step 3: Enter basic business information such as legal name, trade name, physical and mailing addresses, owner names, EIN/SSN tax ID number, contact details, website, and commencement date for charging sales tax.
• Step 4: Select your intended business activities from the options that best describe operations, such as retail sales, wholesaler, manufacturer, e-commerce seller, etc.
• Step 5: Review the business registration summary page and click “Submit” once you verify all information entered is accurate.
• Step 6: The Comptroller's Office will instantly email you a confirmation notice containing your Maryland Sales & Use Tax License Number to begin collecting and reporting sales tax officially. Retain this notice.
• Step 7: Going forward, apply the 6% Maryland sales tax rate to taxable goods/services and file periodic returns even for no taxes collected. The pay balance is due upon filing to remain compliant.
• Step 8: Contact the Comptroller's helpline at 410-260-7980 if you need assistance with the online registration system. Support specialists can answer questions or provide guidance.

That's it! You'll be collecting and charging sales tax legally in no time. Reach out if our team can help explain the process in more detail

Registration requirements for online sellers in Maryland

Online sellers must register in Maryland if they:

• Have over $100,000 in Maryland sales
• Have over 200 separate Maryland transactions
• Use a marketplace facilitator with Maryland nexus

Meeting any of these thresholds creates an obligation to collect and remit state sales tax.

Cost of registration for a Maryland sales tax license

There is no fee to obtain a Maryland sales tax license. You simply register online for free through the Comptroller's website.

More Information & Contacts

For sales tax questions and audit appeals in Maryland, contact:

• Comptroller of Maryland
• Phone: 800-638-2937
• Website: marylandtaxes.gov

There you have it—a full-fledged guide on Maryland's sales tax regime. Need help filing taxes for your ecommerce store? Get a demo with Numeral now.