Sales tax is a tax paid by consumers on the purchase of goods and services. It is collected by the seller and remitted to the state. In Maryland, the sales and use tax rate is 6% of the sales price or purchase price. This includes a 5% state sales tax and a 1% local sales tax. However, sales tax rates can vary across different counties and cities in Maryland.

In this comprehensive guide, we will cover everything you need to know about Maryland sales tax, including:

• Sales Tax Calculator for Maryland
• What’s Taxable and Exempt in Maryland
• How to Get a Sales Tax Exemption Certificate
• Sales Tax Administration in Maryland
• Sales Tax Filing and Remittance
• Penalties for Late Filing and Payment

Understanding sales tax requirements can help both businesses and consumers ensure compliance and avoid unnecessary costs and penalties. Read on to learn more about sales tax in Maryland.

Maryland Sales Tax Calculator

The standard sales tax rate in Maryland is 6%. This includes the 5% state sales tax rate and 1% local tax for the county or city. However, local sales tax rates can vary across different jurisdictions. Here are some examples:

• Baltimore City – 6% (5% state + 1% local)
• Montgomery County – 6% (5% state + 1% local)
• Prince George’s County – 6% (5% state + 1% local)
• Anne Arundel County – 6.5% (5% state + 1.5% local)
• Howard County – 6% (5% state + 1% local)

Maryland also charges sales tax on prepared food and beverages. The tax rate is the same as the general sales tax rate for that jurisdiction.

Some counties also impose an additional alcohol tax on purchases. For example, Montgomery County has an 9% alcohol tax on top of the 6% general sales tax.

To easily calculate sales tax in Maryland, you can use an online sales tax calculator that will apply the correct state and local rates based on your zip code and purchase amount. This can help ensure you calculate and collect the right amount of sales tax.

What’s Taxable and Exempt in Maryland

Maryland sales tax applies to the retail sale, lease, rental, or consumption of tangible personal property and certain services in the state. Some examples of taxable items and services include:

Taxable Goods:

• Clothing and footwear
• Furniture and home furnishings
• Electronics
• Jewelry
• Alcohol and tobacco products
• Groceries, candy, bottled water
• Personal hygiene products

Taxable Services:

• Hotel rooms/short term rentals
• Prepared food and drinks
• Telecommunications services
• Dry cleaning/laundry
• Admissions to amusement parks, concerts, sporting events
• Ground transportation like taxis and ride shares

However, Maryland does provide exemptions on some goods and services. Some common sales tax exemptions include:

• Most prescription and over-the-counter drugs
• Textbooks and educational materials -fuel b
• Food sold in school cafeterias
• Agricultural equipment and machinery
• Manufacturing equipment
• Utility services like water, sewer, energy
• Medical devices and supplies

Non-profits can also apply for sales tax exemption on purchases of tangible goods used to carry out the purposes of the organization. Items must be directly related to the non-profit purpose to qualify.

Sellers should maintain proper documentation to prove a customer or transaction qualifies for a valid sales tax exemption.

How to Get a Sales Tax Exemption Certificate

If a business or organization is exempt from paying sales tax in Maryland, they need to provide an exemption certificate to sellers. This proves their exempt status and excludes them from paying sales tax at the point of sale.

Here are some key points about sales tax exemption certificates in Maryland:

• Qualified non-profits can apply for a sales tax exemption by filing Form 129 – Application for Sales & Use Tax Exemption Certificate. If approved, they will receive a Maryland Sales and Use Tax Exemption Certificate.
• Agricultural producers can apply for an agricultural exemption certificate using Form 130 – Agricultural Exemption Certificate. This exempts them from sales tax on agricultural equipment, machinery, facilities and utilities.
• Buyers must present the valid exemption certificate to sellers before making tax-exempt purchases. This applies to each tax-exempt sale.
• Sellers must keep exemption certificates on file as proof for why they didn’t collect sales tax on a transaction.
• Exemption certificates do not expire and remain valid until cancelled or revoked.
• Illegitimate use of exemption certificates may result in tax liabilities, interest and penalties.

Ensuring proper exemption certificate documentation can protect both buyers and sellers during tax-exempt transactions.

Sales Tax Administration in Maryland

The sales and use tax in Maryland is administered by the Sales and Use Tax Division of the Comptroller of Maryland office. They are responsible for:

• Tax Policy – Administering tax laws, proposing updates to tax policies and regulations
• Registration – Registering businesses for sales tax accounts
• Filing and Remittance – Processing sales and use tax filings and payments
• Audits – Auditing businesses to review compliance
• Taxpayer Assistance – Providing support and guidance to taxpayers
• Enforcement – Enforcing compliance and collecting unpaid taxes

The Comptroller’s office offers resources to assist taxpayers with sales tax compliance:

• Website – The Comptroller website has guides, forms, and FAQs about Maryland sales tax.
• Tax Professionals – Listings for approved tax professionals who can provide assistance.
• Seminars – Free sales tax seminars for training.
• Help Desk – Call 410-260-7980 for sales tax help Monday to Friday 8:30 a.m. – 4:30 p.m.
• Taxpayer Service Centers – Visit one of 12 taxpayer service centers around the state.

Understanding the administration of Maryland sales tax can help businesses stay compliant.

Sales Tax Filing and Remittance

Registered businesses must regularly file Maryland sales tax returns to report sales activity and remit taxes collected.

Key requirements for Maryland sales tax filing and payment include:

• Filing Frequency – Filing frequency is determined by the amount of sales tax liability:
  • Over $12,000/year = Monthly filing
  • $600 – $12,000/year = Quarterly filing
  • Under $600/year = Annual filing
• Due Dates – Sales tax returns and payments are due on the following schedules:
  • Monthly – 20th day of the following month
  • Quarterly – 20th day of April, July, October, January
  • Annual – March 15th
• Electronic Filing – Sales tax returns must be filed electronically through Maryland’s MyTax Portal.
• Payment Options – Payment can be submitted electronically or by mail via check. Electronic payment options include ACH Credit, ACH Debit, credit card, debit card, or EFW transfer.
• Penalties – Late filing or payment is subject to penalties of 10% of tax due + 1% per month up to 25% of tax due.
• Sales Tax Forms – Primary sales tax returns include:
  • Form 202 – Maryland Sales and Use Tax Return
  • Form 203 – Consolidated Sales and Use Tax Return

Keeping up with filing schedules and due dates is essential for Maryland sales tax compliance.

Penalties for Late Filing and Payment

The state of Maryland imposes stiff penalties for businesses that fail to file returns and remit sales tax on time. Here are some key penalties:

• Late filing – 10% penalty on balance of tax due. Minimum $10 penalty.
• Late payment – 1% per month up to 25% maximum penalty on unpaid tax balance.
• Assessments – The Comptroller’s office may issue tax assessments with penalties and interest for unfiled tax periods.
• Revocation of Registration – Failure to file returns may result in business registration certificate revocation.
• Tax Liens – The state can impose liens on business assets for unpaid tax balances.
• Criminal Penalties – Criminal felony charges may apply for willful tax evasion over $10,000.

Some key practices to avoid penalties include:

• File all sales tax returns and payments on time.
• Maintain complete and accurate sales tax records.
• Review return prior to filing to prevent errors.
• Contact the Comptroller’s office with any payment issues or to request an extension.
• Keep business registration active and up to date.

Understanding the consequences of non-compliance can help motivate businesses to stay on top of Maryland sales tax requirements. Putting sound tax management practices in place is key to avoiding unnecessary penalties and costs.

Conclusion

Maryland sales tax laws apply to the retail sale of taxable goods and services throughout the state. All businesses selling taxable items in Maryland need to register, collect, file, and remit the proper sales tax amounts.

Key points to remember include:

• The base Maryland sales tax rate is 6% – 5% state tax plus 1% local tax. Actual rates vary locally.
• Use an online sales tax calculator to accurately determine amounts due.
• Exemptions apply to items like groceries, clothing, and medical supplies. Exemption certificates are required.
• File returns regularly via Maryland’s MyTax portal based on filing frequency.
• Penalties apply for late filing and payment. Maintain compliance to avoid fees.
• The Comptroller’s office provides resources to assist Maryland sales tax compliance.

With proper registration, reporting, and remittance, businesses can stay on top of their Maryland sales tax obligations. Careful tax administration will help avoid costly errors and penalties.