Home Business Sales and Use Tax Sales and Use Tax Every state that has a sales tax also has a use tax on the purchase of goods and services as defined by law. State sales taxes apply to purchases made in Maryland while the use tax refers to the tax on goods purchased out of state. Businesses in Maryland are required to collect Maryland's 6 percent sales tax and or 9 percent alcoholic beverage tax from you whenever you make a taxable purchase. Every time you purchase taxable tangible goods from businesses outside of Maryland, whether in person, over the phone, or on the Internet, the purchase is subject to Maryland's 6 percent use tax or 9 percent alcoholic beverage tax if you use the merchandise in Maryland. Maryland's use tax protects Maryland businesses from unfair competition. Local businesses would be at a competitive disadvantage if consumers were entitled to a 6 or 9 percent discount on items purchased from out of state businesses. Get Sales and Use Tax Information for consumers, or get all the details in the business section. File it! File a Use Tax Return or to get a credit for sales tax paid in another state. Pay it! Submit your payment along with the return. Get a refund! If you improperly paid sales tax and the merchant won't give you credit. File here. Get help! For additional assistance, review the Frequently Asked Questions about Sales and Use Tax. Did you know that you can shop tax free in Maryland twice a year? Read about our Shop Maryland Programs for information about each opportunity! If you will make sales in Maryland, you will need to obtain a sales and use tax license. To obtain one, complete a Combined Registration Application. The application provides a one-stop method for registering a variety of tax accounts, including the sales and use tax license. For additional information about the specifics of certain types of sales rates, fees and exemptions, visit the following two sections in the sales and use tax section for businesses: Special Situations Tax Exemptions Use Tax Information Every time you purchase taxable tangible goods or alcoholic beverages, whether in person, over the phone, or on the Internet, the purchase is subject to Maryland's 6 percent sales and use tax on goods and 9 percent alcoholic beverages tax on alcohol if you use the merchandise in Maryland. When you purchase goods from businesses located outside of Maryland, they are not required to collect Maryland's sales tax unless they have a physical location, or deliver services, in Maryland. Also, you are not required to pay the sales tax in the state where the business is located. However, you are required to pay the 6 percent use tax or the 9 percent alcoholic beverage tax directly to the Comptroller of Maryland by filing the consumer use tax return. Temporary Sales and Use Licenses Individuals who do not have a permanent sales tax license are required to obtain a temporary license and collect a 6 percent or 9 percent sales and use tax for sales at various events such as craft shows and fairs. To obtain a temporary license call 410-767-1543 or 410-767-5462. The temporary license lasts for 30 days. Tax Rates Effective January 3, 2008, the Maryland sales and use tax rate is 6 percent, as follows: 1 cent on each sale where the taxable price is 20 cents. 2 cents if the taxable price is at least 21 cents but less than 34 cents. 3 cents if the taxable price is at least 34 cents but less than 51 cents. 4 cents if the taxable price is at least 51 cents but less that 67 cents. 5 cents if the taxable price is at least 67 cents but less than 84 cents. 6 cents if the taxable price is at least 84 cents. On each sale where the taxable price exceeds $1.00, the tax is 6 cents on each exact dollar, plus: 1 cent if the excess over an exact dollar is at least 1 cent but less than 17 cents. 2 cents if the excess over an exact dollar is at least 17 cents but less than 34 cents. 3 cents if the excess over an exact dollar is at least 34 cents but less than 51 cents. 4 cents if the excess over an exact dollar is at least 51 cents but less than 67 cents. 5 cents if the excess over an exact dollar is at least 67 cents but less than 84 cents. 6 cents if the excess over an exact dollar is at least 84 cents. Download our sales and use tax rate chart. Special rates and situations 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. The 6 percent tax rate is applied to a portion of the sale of new mobile homes and modular buildings, as well as a portion of the gross receipts from vending machine sales. The 9 percent tax rate is applied to sales of alcoholic beverages. Reference the Alcoholic Beverage Tax Rate Chart-9% for details. See the Special Situations section for more information. Sales and Use Tax Regulations The Code of Maryland Regulations (COMAR) are maintained by the Division of State Documents (DSD) under the Office of the Secretary of State and can be accessed through the DSD Web site. To view the regulations, please visit COMAR Online. Nexus Information For Sales & Use Tax 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: 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; 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; Enters the state on a regular basis to provide service or repair for tangible personal property; Regularly uses the person's vehicles to sell or deliver tangible personal property or a taxable service for use in the State; or 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: The person's gross revenue from the sale of tangible personal property or taxable services delivered in the State exceeds $100,000; or 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. Sales and Use Tax FAQs Shop Maryland Programs Twice a year Maryland holds special shopping events when the state sales tax on certain purchases is waived. These events help consumers stretch their dollar just a bit more, and help business owners generate more foot traffic. Shop Maryland Energy and Shop Maryland Tax-free Week occur in February and August every year thanks to legislation passed in the 2007 special session of the Maryland General Assembly. Shop Maryland Energy takes place in the month of February for qualified Energy Star products or a solar water heater. The tax-free period for these products begins on the Saturday immediately preceding the third Monday in February. Shop Maryland Tax-free Week occurs every year beginning the second Sunday of August through the following Saturday. Each qualifying article of clothing or footwear selling for $100 or less is exempt from sales tax, regardless of how many items are purchased at the same time. For example, two $60 sweaters purchased at the same time are both exempt even though the total of the purchase is greater than $100.Additionally, the first $40 of a backpack or bookbag purchase is also tax-free. Accessory items, except for backpacks, are not included. Unlike previous tax-free periods, businesses selling other items not eligible for inclusion in the tax-free week can participate in Shop Maryland. Under regulations dubbed Sellers Privilege, other merchandise besides apparel and backpacks can be sold tax free but with the retailer paying the sales tax. These tax-free events will continue until the legislature decides to revisit the issue. Seller's Privilege Unlike in previous tax-free periods, businesses selling other items not eligible for inclusion in the tax-free week can participate in Shop Maryland. Legislation passed in 2007, dubbed Sellers Privilege, allows other merchandise besides apparel to be sold tax free but with the retailer absorbing the sales tax. A vendor may assume or 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 the 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. Shop Maryland Tax Free Shop Maryland Energy ENERGY STAR Sales Records By law, you are required to make your business records available for inspection by an auditor from the Comptroller's Office at any time during business hours. The burden of proof is on you to demonstrate that you collected and paid the sales and use tax correctly. Your records must adequately distinguish taxable sales and purchases from non-taxable sales and purchases. If you do not have adequate records, the Comptroller's Office may compute a liability by projection from available records, by a survey of similar businesses or on any other reasonable basis. You must keep all records pertaining to sales and purchases for four years. You should keep the kinds of general business records that are appropriate for your type of business. These general business records might include a general ledger, subsidiary ledgers, journal entries, bank statements, check stubs, and federal and state income tax returns. An auditor must be able to follow the flow of each transaction and match up all documents pertaining to that transaction. Documents or books of records that are incomplete, missing or illegible are not adequate records. You will also need to keep, where appropriate: Original invoices Resale certificates Bills of lading Sales slips Receipts for purchases Purchase orders Mailing or shipping documentation for out-of-state deliveries Cash register tapes Documentation for exempt sales Reproductions of records made in the regular course of business, as well as computerized records are permissible if you follow certain guidelines. Out-of-State-Deliveries You are not required to collect tax on articles that you have delivered to an address outside the state of Maryland if you have no reason to believe the articles are intended for use in Maryland. Your records should clearly state that an item was delivered out-of-state. Sales to Corporations with Direct Payment Permits A few large corporations have Direct Payment Permits, which authorize them to pay the tax directly to the comptroller. If you make a sale to one of these corporations, you must record the Direct Payment Permit number with your records of the sale. Production Exemptions The Maryland sales and use tax does not apply to sales of machinery and equipment used in production activities, sales of tangible personal property for consumption in production activities, or sales of tangible personal property for resale or incorporation as a material or part of other tangible personal property produced for sale. The Tangible Personal Property Used or Consumed in a Production Activity citations are from COMAR 03.06.01.32-2 and COMAR 03.06.01.24. Exempt activities Tax-exempt production activities include: Assembling, manufacturing, processing, or refining tangible personal property for sale or resale (except for processing food or beverages by a food vendor); Generating electricity for sale or for use in production activity; Establishing or maintaining clean rooms or clean zones required by federal laws pertaining to manufacturing drugs, medical devices, or biologics; Producing, maintaining, and repairing production machinery or equipment; Laundering, maintaining or preparing textiles in providing the taxable service of commercial cleaning or laundering of textiles for a buyer engaged in a business that requires this service on a recurring basis of a commercial cleaning or laundering of the textiles; Providing for the safety of employees, including safety glasses, hard hats and breathing apparatus; or, Providing for quality control. Servicing, maintaining, or repairing tangible personal property other than production machinery or equipment, or providing for the health and comfort of employees are not production activities. Exempt items Tax-exempt items include: any tangible personal property used directly and predominantly in a production activity in any stage of operation on the production activity site - from handling raw materials or components to moving finished product; foundations to support other machinery and equipment or an item required to conform to air or water pollution laws and normally considered part of real property; safety equipment used in production activity; quality control machinery and equipment used in a production activity site; equipment and supplies used to remove finished goods on a production activity site; machinery used to produce bituminous concrete; and certain specified equipment used in aluminum production. "Direct" and "predominant" use Tangible personal property is considered to be used "directly" when the use of the property is integral and essential to the production activity; the use occurs where the production activity is carried on and occurs during the production activity. The property is considered to be used "predominantly" when the property is used directly in production activities more than 50 percent of the time. Lease payments Lease payments of production activity equipment also qualify for the exemption. If machinery or equipment is used both in a production activity and administrative, managerial, sales or any other non-operational activity, the exemption applies if it is used at least 50 percent of the time in a production activity. Food preparation by restaurants and food retailers Generally, food processed for sale by grocery stores, bakeries and other food retailers does not qualify for exemption. However, there is a specific exemption for the sale of equipment to be used by a retail food vendor to manufacture or process bread or bakery goods for resale. To qualify for the exemption, the vendor must operate a substantial grocery or market business (as defined in Section 11-206(a) of the Tax-General Article) at the same location where the food is sold. The taxable price of each piece of exempt equipment must be at least $2,000. Utilities and fuel Sales of utilities and fuel qualify for exemption under the same terms as other consumables. However, the use of these items in operating administrative, commercial and storage facilities and in providing plant heating and air conditioning is not exempt. When utilities are sold through a single meter for both taxable and exempt uses, taxability is controlled by majority usage. The taxability of oil and coal is also controlled by majority usage where it is impractical to segregate qualifying and non-qualifying usage. To claim the exemption for utilities and fuel, contact Taxpayer Service to obtain Form ST206 and send the completed form to the vendor. Research and development The sales tax does not apply to purchases of tangible personal property for use or consumption in research and development. Research and development means basic and applied research in the sciences and engineering and the design, development and governmentally mandated pre-market testing of prototypes and processes. Market research, research in the social sciences or psychology, and other nontechnical activities, routine product testing, sales services or technical and nontechnical services are not included. No special forms are required to claim the research and development exemption. If entitlement to exemption is not evident from the documents of sale, the vendor should obtain a certificate from the purchaser stating that the property will qualify. Resale and incorporation exclusions Vendors may not recognize the resale and incorporation exclusions unless you provide them with a resale certificate with a signed statement that the purchases are for resale and including the buyer's name, address and Maryland sales and use tax registration number. For more information on the use of resale certificates, contact Taxpayer Service and request Business Tax Tip #4, If you Make Purchases for Resale. Printing industry The sales tax does not apply to the sale of photographic materials used to produce an item (such as a photographic plate) used in composing, printing or producing another item used in printing. Sales of artwork, electrodes, electrotypes, composition, litho-graphic plates or negatives, mats, photo engravings, stereotypes or typographies for direct use by a person engaged in printing tangible personal property for sale are also exempt. A person selling the items, other than those that are photographic in nature, must pay the tax on all materials used to produce them. A printer who produces these items for self use also must pay tax on all materials. Claim procedure No special forms are needed to claim the machinery and consumable exemptions, other than Form ST206 for utilities and fuel. If a vendor requires documentation to support a claim for the machinery exemption, a signed form certifying use in production activities may be provided. The consumables exclusion may be supported by a statement in the form of a resale certificate stating that the property will qualify. Sales to Exempt Nonprofit Organizations Certain qualified nonprofit organizations are exempt from paying tax on the purchase of items which will be used in carrying out the business of the organization. The state of Maryland issues exemption certificates to properly qualified organizations. You should record the eight-digit number from this certificate on your copy of the receipt or sales slip. If you are presented with an exemption certificate, you may use our online service to verify its validity. Sales of Materials Used in Production Activities Materials that will be incorporated in property to be produced for sale are not subject to tax. You should keep a resale certificate, signed by the buyer and bearing the buyer's Maryland registration number, on file to document the tax-free sales of exempt materials. If you are presented with a resale certificate, you may use our online services to verify its validity. Guidelines for Reproduced or Computerized Sales Records Reproductions of records made in the regular course of business, as well as computerized records, are permissible if you follow the guidelines outlined below. Microfilm and Microfiche You must offer suitable facilities for viewing microfilm and microfiche records. You must also provide any copies which may be required for tax verification purposes. Computerized Tax Accounting Produce visible records necessary to verify tax liabilities. Permit a transaction to be traced back to the original source or forward to the totals. Make available a description of the system, including flow charts and procedures. Have controls to insure accuracy. Sales to Foreign Diplomats The U.S. Department of State issues a white plastic tax exemption card to qualified diplomats. You must record the tax-exempt number from the back of the card onto the sales slip. Please be aware that the certificates may not be valid for all purposes. Blue stripes Cards with BLUE stripes entitle the holder to an exemption from the tax on all purchases. Green stripes Cards with GREEN stripes entitle the holder to an exemption from the tax on all purchases except the tax on transient accommodations. Red stripes Cards with RED stripes entitle the holder to an exemption from the tax on purchases of taxable items, which exceed the $50, $100 or $200 levels printed on the reverse side of the cards. Online verification You may use our online service to verify the validity of a diplomatic tax exemption card. Resale Certificates A resale certificate is a written statement that you provide stating that the merchandise or taxable service you buy will be resold in a taxable sale or that it will be incorporated into tangible personal property or used in a service that will be taxed when it is sold. 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. Note: 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. If you frequently deal with the same vendor, you may provide that vendor with a blanket resale certificate stating that all purchases are for resale. However it is important to note that your vendor retains the right to ask for a resale certificate for each transaction. If the vendor agrees to receive your blanket resale certificate then all you have to do is give the supplier your sales and use tax registration number. Record Keeping Vendors must clearly document the reason for all tax-exempt sales and 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. You can be held liable for uncollected taxes if you accept resale certificates for sales that you know or should know are not for resale. Purchases under $200 Resale certificates may not be used to make tax-free purchases for resale if the purchase is less than $200 and payment is by cash, check or credit card unless the seller delivers the goods directly to the buyer's retail place of business. However, you may present a resale certificate to make a tax-free purchase of goods for less than $200 if you are purchasing goods: (1) on credit by the seller; (2) which would be exempt even if not sold for resale; or (3) which are alcoholic beverages regulated by Article 2B of the Annotated Code of Maryland. View a Sample Blanket Resale Certificate. Reports and Statistics Regarding Sales and Use Tax The following report(s) are part of a collection of monthly revenue reports published by the Comptroller's Office. For a full listing of monthly and annual reports, see Spotlight on Maryland Money. Sales and Use Tax Monthly Comparative Revenue Statement: Comparative statement of sales and use tax receipts. Sales and Use Tax Facts The Sales and Use Tax Facts are developed by the Comptroller's Office each year to inform taxpayers of any new legislation affecting sales and use tax and/or new procedures on how it is collected, remitted etc. Sales and Use Tax Facts 2023-2024 Sales and Use Tax Facts 2022-2023 Sales and Use Tax Facts 2021-2022