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Maryland has a state sales tax and additional taxes for retail sales in certain industries. The state’s counties and cities do not collect discretional taxes (local sales tax) – additional sales and use tax rates added to the state sales tax rate of 6 percent.
Types of taxes
Maryland has several taxes in addition to the sales and use taxes. However, these taxes are industry-specific rather than discretionary taxes charged to local businesses by their jurisdictions.
Sales and use tax
As with most other states, Maryland also has a state sales tax on tangible personal property and services. Maryland also has a use tax that works in conjunction with the sales tax. The use tax rate is the same as the sales tax rate at 6 percent. If a business taxpayer purchases taxable goods and uses or stores them rather than putting them up for resale, the business must pay the use tax on those goods.
Modular buildings and mobile homes
- Apartment units.
- Single or multi-family homes.
- Commercial buildings.
- Certain permanent additions to any of the above.
Mobile homes are defined as buildings that are:
- Transportable and have at least one section;
- At least 8 feet wide and 30 feet long;
- On a permanent chassis; and
- Whether with or without a permanent foundation, it is designed to be used as a dwelling when the building is connected to the utilities.
Used mobile homes are exempt from the Maryland state sales tax.
Alcohol sales tax
Alcoholic beverages have a sales and use tax rate of 9 percent instead of the state’s 6 percent rate. The higher rate applies to sales of:
- Distilled spirits.
- Beverages that contain alcoholic and non-alcoholic components.
- Alcoholic coffee drinks.
- Gelatin shots that contain alcoholic beverages.
- Any beverage that contains one-half of 1 percent or more of alcohol by volume.
Although cooking wine, cooking sherry, and flavored extracts have alcohol in them, they are exempt from the 9-percent sales tax rate.
To figure the 9-percent tax rate, compute it out to the third decimal place, then round the tax off to a whole cent. If the third decimal is greater than 4, round up to the next cent. If it is 4 or less, round down. For example, on a tax of $0.742, the third digit is less than 5, so the tax would be $0.74. On a tax of $0.77, the third digit is higher than 4, so the tax would be $0.78.
Short-term vehicle rental tax
Businesses that rent motor vehicles for the short term must collect a tax of 11.5 percent. Some truck rentals are taxed at a lower rate of 8 percent.
Maryland also has a tobacco tax:
- Cigarettes have a tax of $2 per pack. Certain packs have a $3.75 tax per pack.
- Other tobacco products are taxed at 30 percent of the wholesale cost. Certain tobacco products are taxed at the 53 percent tax rate.
- ESD products, depending on the product, are subject to tax rates from 6 percent to 12 percent.
- ESD liquid of less than 5 ml has a 6-percent sales tax, though certain products could have a tax rate of up to 60 percent.
- Cigars are taxed at 70 percent of the wholesale price.
- Pipe tobacco is taxed at 30 percent of the wholesale cost.
- Premium cigars are taxed at 15 percent of the wholesale cost.
Registering for and filing Maryland’s taxes
To register for an account to pay sales and use tax online, a business needs a Federal Employer Identification Number (FEIN). If you are a sole proprietor, you do not need a FEIN. If the business has an existing account but needs to apply for a sales and use tax account or the business wants to consolidate two accounts, it must complete a paper application tax form.
A business must also complete the paper application if it is applying for an account for the following:
- Alcohol tax license;
- Motor fuel tax account; and
- Tobacco tax license.
Mail paper applications to:
Comptroller of Maryland
Revenue Administration Center
110 Carroll Street
Annapolis, MD 21411-0001
Tax due dates are the 20th day of the month following the collection month. For example, if you collected sales tax in January 2022, you must remit tax returns and tax payments by February 20. Use tax returns are due at the same time.
Maryland agricultural exemptions
Certain items used for agricultural purposes are exempt from the state’s sales and use tax, including:
- Feed for livestock.
- Bedding for livestock.
- Baler wire or twine.
- Tractor fuel.
- Milking machines used in farming.
- Farm vehicle when used in farming.
- Wood products processed by a sawmill as long as the farmer retains ownership of the products and uses them for farm use.
- Farm equipment used to prepare, tend and irrigate the soil.
- Farm equipment used to raise livestock.
Calculating Maryland’s sales and use tax liability
Because Maryland does not have discretionary taxes, it is easy to compute the sales tax. Multiply .06 by the sales price of each item. For example, if Widget A costs $150, determine the sales tax by multiplying 150 times .06 for a tax obligation of 9. The total the business should collect is $159.
Remote sellers must register with the Maryland Comptroller and collect sales tax on sales they make to Maryland residents and businesses. Remote sellers include marketplace sellers. Even if a business does not have a physical nexus in Maryland, it must pay the sales and use taxes when selling to residents.
An out-of-state business does not have to collect sales tax unless the taxable goods it sells to residents exceed $100,000 or the business has 200 or more separate transactions with Maryland residents. However, most businesses do collect sales tax as a convenience to buyers.
If an out-of-state business does not collect Maryland sales tax, residents and businesses must pay the state’s use tax of 6 percent.
Maryland sales tax holiday
Maryland has a sales tax holiday that lasts from the second Sunday in August through midnight the following Saturday to help people save a little money, especially those spending on school supplies for children. Certain items that cost less than $100 qualify for the sales tax exemption.
The exemption does not apply to several items, including:
- Anything that costs over $100, e.g., the first $100 of a $200 shirt. The buyer must pay the full sales tax on any item that has a price tag that is more than $100.
- Specialty clothing items, such as footwear for protective use or football pads.
- Taxable services, such as alterations.
Maryland’s state sales and use tax rate is 6 percent. Local governments do not charge additional retail sales taxes.
A business cannot apply for a sales tax resale certificate online. It must complete the Sales and Use Tax Exemption Certificate Application and submit it to the Maryland Comptroller’s Office.
Yes. Some states require you to collect the taxes if you meet the threshold of $100,000 in yearly sales or 200 separate transactions. However, most businesses have an account at the Maryland Comptroller’s Office to remit taxes and sales tax returns even if they do not meet the threshold.
No. If it is a store coupon, the store must charge tax on the regular price since no one else is available to pay the tax. However, if the customer has a manufacturer’s coupon, the manufacturer pays the tax, so those are deducted before taxing the item.
Shop Maryland Energy is a tax-free week that the state holds on the Saturday following the third Monday in February. Individuals and businesses can purchase Energy Star appliances tax-free during this period.
Yes. Business filers must still file a tax return even if it did not collect sales and use taxes for the previous month.
No. Maryland does not have discretionary taxes charged by cities and counties.
Several services are taxable under Maryland law, including security services, pay-per-view TV services, mobile telecommunications services, credit reporting services, cleaning services for commercial or industrial buildings, and several other services.
No. Hotels and other such establishments charge the regular state sales tax of 6 percent. However, Dorchester County has a 2.5 percent hotel surcharge, which the county imposes on top of the sales tax if the establishment has at least 380 rooms.