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Tax Exemptions

Sales and Use Tax Exemptions

There are sales and use tax exemptions on certain types of repairs and sales.

Repair labor

The restoration of used property to its original condition or usefulness is repair, which is not taxable. The creation or completion of a new or different item is fabrication, which is taxable. Charges for parts installed on repaired items are taxable if repair labor and parts charges are separately stated. Parts sold over-the-counter are taxed. The sales and use tax applies to automobile repairs the same way it applies to repairs to other kinds of property such as appliances, home electronics and office equipment. You must pay tax on parts if you are making lump-sum repairs for a governmental or other exempt organization. The exemption of these organizations does not extend to the purchases of parts for lump-sum repairs on property other than realty.

Contractors making repairs of realty must pay the tax on all purchases of materials used. The only exception is that contractors for private nonprofit charitable, educational or religious organizations may use the organization's Maryland sales and use tax exemption certificate to avoid the tax on purchases of materials that will be installed in real property.

The restoration of used property to its original condition or usefulness is repair, which is not taxable. The creation or completion of a new or different item is fabrication, which is taxable. Charges for parts installed on repaired items are taxable if repair labor and parts charges are separately stated. Parts sold over-the-counter are taxed. The sales and use tax applies to automobile repairs the same way it applies to repairs to other kinds of property such as appliances, home electronics and office equipment. You must pay tax on parts if you are making lump-sum repairs for a governmental or other exempt organization. The exemption of these organizations does not extend to the purchases of parts for lump-sum repairs on property other than realty.

Contractors making repairs of realty must pay the tax on all purchases of materials used. The only exception is that contractors for private nonprofit charitable, educational or religious organizations may use the organization's Maryland sales and use tax exemption certificate to avoid the tax on purchases of materials that will be installed in real property.

When you purchase parts and supplies for resale over-the-counter or which you will install and bill for separately, you may claim the resale exclusion by giving your supplier a resale certificate bearing your Maryland sales and use tax registration number. Suppliers must exercise reasonable judgment in accepting or acting on resale certificates. They must charge the tax on sales to repairers of goods that are obviously not for resale, including tools, stationery, soap, masking tape and sandpaper, even if repairers have provided a resale certificate.

What about free installation?

If you sell a part, such as a muffler, and offer free installation, you must collect the tax on the full price of the muffler. The transaction is treated as if separate charges for labor and materials are being made and the labor charge is zero.

What special rules apply to maintenance contracts?

The tax does not apply to the charge for a maintenance contract unless it must be purchased as a condition of the sale or lease of the property. If you are performing repairs under an optional maintenance contract, you must pay the tax on materials passing to customers unless a separate additional charge is made for them. If you are making repairs under a mandatory maintenance contract, or warranty included in the original selling price, you may claim the resale exclusion on purchases of materials passing to customers.

Can I avoid the tax on my purchases of consumables by including their cost in my parts charge and collecting tax from my customers?

No. No matter how you decide to bill your customers, you are required to pay tax on your purchases of consumables.

How do I claim exemption on materials I will resell?

When you purchase parts and supplies for resale over-the-counter or which you will install and bill for separately, you may claim the resale exclusion by giving your supplier a resale certificate bearing your Maryland sales and use tax license number.

If I give my parts supplier a resale certificate, isn't everything I buy from that supplier exempt?

No. Suppliers must exercise reasonable judgment in accepting or acting on resale certificates. They must charge the tax on sales to repairers of goods that are obviously not for resale, including tools, stationery, soap, masking tape and sandpaper, even if repairers have provided a resale certificate. If suppliers fail to charge the tax where applicable, they can be held responsible for the uncollected tax.

If you accept trade-ins or require the exchange of a used item or core when making sales, you must charge tax on both the cash paid and the value of the trade-in or exchange.

For example, if you sell a starter for $54 in cash and collect $10 as security for a trade-in of an old starter, you must collect tax on $64, the cash price of the new starter plus the value of the anticipated trade-in. When the customer turns in the old starter, you do not refund the tax on the $10, which you refund to the customer.

Selected re-manufactured parts exempt

The tax does not apply to core charges made in connection with sales of these re-manufactured truck parts and their components:

  • Air brake systems
  • Engines
  • Rear axle carriers
  • Transmissions

You must collect tax on charges for "miscellaneous materials" such as gaskets, which are incorporated into repaired property if you state the charge for these miscellaneous materials separately.

You do not collect tax on charges for "shop materials" such as sandpaper, drill bits, soap, rags and masking tape, used in making repairs but not incorporated in the repaired property.

If a miscellaneous or shop materials charge includes both materials consumed in making repairs and those that are incorporated in the repaired item, the entire amount of the charge is taxable.

If you repair personal property, you DO NOT have to pay the tax on purchases of:

  • Parts you will resell over-the-counter
  • Parts installed in customer property under mandatory maintenance contracts; or
  • Parts that will be installed on property you are repairing for which a separate charge will be made.

You DO have to pay the tax on:

  • Purchases of parts and supplies used in lump-sum billing; and
  • Items you use yourself such as tools and stationery.
  • Materials and supplies consumed in repairing property but which do not become a part of the property, such as soaps, rags, masking tape, and sandpaper

For additional information, feel free to view the Business Tax Tip #7 and Business Tax Tip #8.

Agriculture Exemptions

The sales and use tax does not apply to sales, including rentals, to a farmer of farm equipment used to raise livestock and poultry, prepare, irrigate or tend the soil, or plant, service, harvest, store, clean, dry or transport seeds or crops. Farm equipment that is used for traditional agricultural purposes is exempt from sales and use tax even if attached to real property. The tax does not apply to the sale of an agricultural product by a farmer. However, sales of flowers, sod, decorative trees, shrubs and any other product usually sold by a nursery or horticulturist do not qualify for exemption.

Commercial aquaculture is given the same treatment as is commercial agriculture.

If a farmer is engaged in processing food for sale, there are exemptions available for purchases of capitalized equipment and consumables. These exemptions are explained in Business Tax Tip #9.

What records of sales should vendors who sell agricultural equipment and supplies maintain?

When the record of sale does not clearly include all elements necessary to justify exemption, a vendor may ask for a signed statement to indicate that the customer is a farmer or that the purchases will be used only for agricultural purposes. Even if a certification is provided, a vendor must collect the tax if he or she knows or should know that the purchase does not qualify for exemption.

Are there any special provisions for sales by farmers?

Yes. The tax does not apply to the sale of an agricultural product by a farmer. Sales of flowers, sod, decorative trees, shrubs and any other product usually sold by a nursery or horticulturist do not qualify for this exemption.

Are there any exemptions for food processing?

Yes. If a farmer is engaged in processing food for sale, there are exemptions available for purchases of equipment and consumables. These exemptions are explained in business tax tip #9, Sales and use tax exemptions for production activities.

Below are some examples of exempt farm equipment.
Balers Forage harvesters
Beekeeping equipment Grain handling equipment
Binders Haybines
Blowers Irrigation equipment
Choppers Livestock/poultry fans
Conveyers Milk cans
Corral Handling Equipment Milk coolers
Cribs Milk strainers
Crushers Milking machines
Cultipackers Mowers
Diggers Poultry equipment
Drags Rollers
Drills Rotary hoes
Dryers Scales
Dusters Seed cleaners
Egg handling equipment Seeders
Elevators Shellers
Farm graders Sorters
Farm loaders Sprayers
Farrowing crates Storage tanks
Feed grinders Subsoilers
Feeders Vaccinating panels

The sale to a farmer of a vehicle used only in the farming business and about the farmer's home is exempt from sales and use tax. Replacement parts and additional equipment for these vehicles are also exempt.

A farm vehicle is one that qualifies for a registration plate containing the word "farm" if titled and registered in Maryland.

Vehicles used to haul products for resale or to haul farm products for another person who is not a farmer do not qualify for the exemption.

Sales, for agricultural purposes, of livestock, including poultry, are not taxable. Also exempt are sales of feed or bedding for livestock. The raising of horses for breeding purposes is an agricultural purpose, but the maintenance or sale of riding, show or race horses is not. The raising of livestock by members of 4-H or similar organizations for agricultural educational purposes qualifies for tax exemption, but the maintenance and sale of pets, dogs for breeding purposes and animals for testing purposes do not.

Below are some examples of non-exempt farm equipment.

Antifreeze Motor Oil
Barbed Wire Pails
Brooms Paint
Cement Paint Brushes
Clothing Pothole Diggers
Detergents Pruners
Electric Drills Rakes
Fencing Material Riding Lawn mowers
General Water Systems Roof Material
Hammers Sandpaper
Home Appliances Saws
Incinerators Shovels
Light Bulbs Snow Blowers
Lubricants Three-Wheeled Vehicles

Sales of hand tools , carpentry, cleaning and maintenance supplies, materials to be incorporated into real property, and materials purchased for personal, rather than agricultural use, are subject to the sales and use tax.

When sold for agricultural purposes , seeds (including plants and seedlings), fertilizer, lime, fungicide, herbicide and insecticide are exempt. These items are exempt when used for raising vegetables at home but are not exempt when used to maintain a flower or other decorative garden or lawn. The tax does not apply to sales of containers used by a farmer to transport farm products to the market or to sales of baler twine or wire. Fuel for use in farm equipment or farm tractors is exempt, along with replacement parts and components, including hydraulic oil.

It is not necessary to register with the Comptroller's Office to claim agricultural exemptions. However, a vendor may ask for a signed statement to indicate that the customer is a farmer or that the purchase will be used only for agricultural purposes. Even if a certification is provided , a vendor must collect the tax, if he or she knows or should know that the purchase does not qualify for exemption.

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.

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.

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

The Maryland sales and use tax does not apply to sales of tangible personal property used directly and predominately in production activities.

"Production activity" means

  • 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 or 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.

Machinery or equipment used both in a production activity and administrative, managerial, sales or any other non-operational activity is exempt from Maryland sales tax if the equipment is used at least 50 percent of the time in a production activity. The exemption applies to the purchase or lease of qualified production activity equipment.

Manufacturing equipment for bakery goods

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

The following property items are exempt from the Maryland sales and use tax:

  • 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 use" in production activity

To meet the "directly" test, the use of the property must be integral and essential to the production activity, occur where the production activity is carried on and occur during the production activity.

"Predominate use" in production activity

The "predominantly" test is met if the property is used more than fifty (50%) percent of the time directly in production activities.

Please note: 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.

Sales of utilities and fuel qualify for exemption from Maryland's sales and use tax 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, complete Form ST 206, and forward it to the vendor.

The 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. If you are the person selling the items, other than those that are photographic in nature, you must pay the tax on all materials used to produce them. If you produce these items for self-use, you must also pay tax on all materials.

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. A statement in the form of a resale certificate stating that the property will qualify may support the consumables exclusion.

If you overpaid the tax on any production activity purchases, you may apply for a refund within four years from the date of payment of the tax by completing Form ST205.

Mail the completed Form ST205 to:

Comptroller of Maryland
Compliance Division
301 West Preston Street
Baltimore, MD 21201-2383

For assistance or information on filing refund claims, call 410-767-1530 or 410 767-1538 within the Baltimore area or 1-800-492-1752 from elsewhere in Maryland, Monday - Friday, 8:30 a.m. - 4:30 EDT.

Under Section 11-217(a) of the Tax-General Article, "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, products, and processes. Market research, research in the social sciences or psychology, and other non-technical activities, routine product testing, sales services, or technical and non-technical services are not included.

Purchases of tangible personal property for use or consumption in research and development are exempt. No special forms are required to claim the research and development exemption. If entitlement to exemption is not evident from the documents of sale, a vendor should obtain a certificate from the purchaser stating that the property will qualify.

NonProfits and other Qualifying Organizations

The Comptroller's Office issues sales and use tax exemption certificates to certain qualifying organizations, entitling them to make specific purchases without paying sales and use tax and is renewed every five (5) years.

The following organizations can qualify for exemption certificates:

  • Nonprofit charitable, educational and religious organizations
  • Volunteer fire companies and rescue squads
  • Nonprofit cemetery companies
  • Qualifying veterans organizations
  • Government agencies
  • Credit unions

By law, Maryland can only issue exemption certificates to qualifying, nonprofit organizations located in Maryland or in any of the following adjacent jurisdictions: Delaware, Pennsylvania, Virginia, West Virginia and Washington, D.C.

Certificates issued to nonprofit religious, educational, and charitable organizations, nonprofit cemeteries, credit unions, qualifying veterans organizations and volunteer fire companies or rescue squads are printed on white paper with blue ink and contain an expiration date of September 30, 2022. Certificates issued to governmental entities are printed on white paper with red ink and contain no expiration date.

An organization may use its exemption certificate to purchase tangible personal property that will be used in carrying on its work. This includes office supplies and equipment and supplies used in fundraising activities, but does not include items used to conduct an "unrelated trade or business" as defined by Section 513 of the U.S. Internal Revenue Code.

The exemption certificate is a wallet-sized card, bearing the holder's eight-digit exemption number and an expiration date. An exemption certificate is not transferable and applies only to purchases made by the registered organization. It may not be used to purchase items for the personal use of officials, members or employees of the organization, or to purchase items that will be donated to the organization.

An exemption certificate should not be confused with a resale certificate, which is used by manufacturers, wholesalers and retailers to purchase, free of tax, the items they sell.

Target Redevelopment Areas and Opportunity Zones

§11-232 and § 11-236 of the Tax General Article of the Maryland Annotated Code permit an exemption from sales and use tax on certain construction materials and warehousing equipment for use in certain areas. These areas include: target redevelopment areas in Baltimore County that were previously owned by Bethlehem Steel Corporation, or any of its subsidiaries, and are participating in the Voluntary Cleanup Program under the Environment Article; qualified opportunity zones in Baltimore County that have been designated as an enterprise zone under the Economic Development Article, designated an opportunity zone under the Internal Revenue Code, and were previously owned by the United States; and target redevelopment areas in Washington County that have been designated enterprise zones under the Economic Development Article, and were previously owned by the United States or CSX Railroad.

The statutes require the buyer of construction materials to provide the vendor with evidence of eligibility for the exemption issued by the Comptroller. Exemption certificates for target redevelopment areas and opportunity zones are eight and a half by eleven inch certificates bearing the Comptroller's embossed seal.

The Comptroller will issue an exemption certificate to the entity based upon its eligibility for the exemption upon receipt and approval of a written request. The request should be on the requesting entity’s letterhead and must be signed by an authorized officer. The request must also include the legal name of the entity, Federal Employer Identification Number, physical business address, and mailing address. In order to be eligible for the exemption certificate, the applying entity must own the property or the entity must obtain written confirmation from the owner that it is qualified to make purchases of construction materials and/or warehouse equipment subject to the exemption under § 11-232 or § 11-236 of the Tax General Article of the Maryland Annotated Code. This written confirmation must be attached to the entity’s written request for an exemption certificate.

The request should be mailed to:

PO Box 1829 – Legal Section
Attn: Redevelopment Sales and Use Tax Exemption
Annapolis, MD 21404-1829

If you are making a sale to an exempt organization, you must record the organization's name and certificate number on the record of sale. You must also see the exemption certificate before completing the sale.

You do not need to keep a copy of the certificate unless the organization is purchasing gas, electricity, steam, oil or coal.

You can check the validity an exemption certificate online.

Use our Verify Tax Exemptions online service to verify the validity of Tax Exemption certificates presented to you. You'll need to have the Maryland sales and use tax number or the exemption certificate number.

To apply for an exemption certificate, complete the Maryland SUTEC Application form. The application may also be obtained by calling Taxpayer Service at 410-260-7980, or toll-free 1-800-638-2937 from elsewhere in Maryland, Monday - Friday, 8:30 a.m. - 4:30 p.m. EDT

There is no provision for applying for the exemption certificate online. You must complete the hard copy version of the application to apply for the certificate.

Nonprofit organizations must include copies of their IRS 501 (c) (3) determination letter, articles of incorporation and their organization's bylaws with the completed application. Failure to do so will result in the application being returned.

Mail the completed application and required documents to:

Central Registration Section - SUTEC
Comptroller of Maryland
Revenue Administration Division
PO Box 549
Annapolis, MD 21404-549

To request duplicate Maryland sales and use tax exemption certificate, you must submit a request in writing on your nonprofit organization's official letterhead and indicate the reason for your request. Unless the reason for your request is that your original sales and use tax exemption certificate is lost or misplaced, you must include with your request your original sales and use tax exemption certificate card or a duplicate certificate will not be issued.

You must also include your organization's Federal Employment Identification Number (FEIN) and indicate any change in the organization's name, address (physical and mailing address must be indicated), phone number, and contact person. Please note that letter requests must be signed by an authorized officer of the organization. If there was an organization name change, you must include official documents from the Maryland Department of Assessments and Taxation confirming the name change.

Mail the request, original certificate card, and any necessary documents to:

Central Registration Section - SUTEC
Comptroller of Maryland
Revenue Administration Division
PO Box 549
Annapolis, MD 21404-549

For more information about duplicate exemption certificates, call Taxpayer Services at 410-260-7980, Monday - Friday, 8:30 a.m. - 4:30 p.m.

SALES AND USE TAX EXEMPTION CERTIFICATE RENEWAL APPLICATION

Completing the renewal application

You must have the following information before you can renew your organization's Maryland Sales and Use Tax Exemption Certificate:

  • Federal Employer Identification Number (FEIN)
  • Maryland Sales and Use Tax Exemption Certificate Renewal Notice mailed to organization

If the name of the organization has changed, you must upload a copy of the amended articles of incorporation. You must also upload documentation from the IRS if there has been a change in your organization's FEIN.

It is not necessary to renew exemption certificates issued to government agencies since those certificates do not expire. All organizations are urged to submit the renewal through the application online. If you are unable to complete the online web application, you may download a paper application. Although paper submissions are accepted, the processing time will be delayed because all paper applications must be manually reviewed.

FAQ's

Purchases made by veterans organizations and their auxiliary units are exempt from Maryland sales tax if the purchases are made for the organization's exempt purposes.

The exemption became effective on July 1, 2006. Exemption certificates issued to qualifying veterans' organizations will expire on September 30, 2017. The new exemption certificate is a white card with green printing, bearing the organization's eight-digit exemption number. Certificates are renewed every five (5) years.

The organizations or their auxiliaries or units must possess a 501(c)(19) letter of determination from IRS as evidence of qualification for the exemption. For more information on obtaining a letter of determination from IRS, visit the IRS Web site.

To apply for an exemption certificate, print a copy of Maryland SUTEC Application and submit the completed application with a copy of the 501(c)(19) letter of determination, articles of incorporation and bylaws. The application may also be obtained by calling Taxpayer Service at 410-260-7980, or toll-free 1-800-638-2937 from elsewhere in Maryland, Monday - Friday, 8:30 a.m. - 4:30 p.m. EDT

A contractor may use an organization's exemption certificate to purchase materials that will be used to construct, improve, alter or repair the real property of private, nonprofit charitable, educational, and religious organizations; volunteer fire companies and rescue squads; and nonprofit cemeteries. The materials must be incorporated into the realty to qualify for the exemption. Sales of materials used to improve the realty of government entities, credit unions and veterans organizations are taxable, and their certificates may not be used by contractors.

A contractor may use an exemption certificate from a nonprofit organization if the first two digits of its exemption number are:

  • 29 (religious organizations),
  • 31 (charitable and educational organizations), or
  • 33 (volunteer fire departments, rescue squads and ambulance companies).

Purchases made by using the following charge cards are subject to the Maryland sales and use tax since they are billed directly to the individual and are not treated as direct sales to the federal government:

  • 30 (government agencies), or
  • 32 (credit unions), or
  • 34 (veterans organizations).

The following sales made by nonprofit organizations are exempt from the Maryland sales and use tax:

  • Sales by churches or religious organizations for their general purposes.
  • Sales of food by schools other than post-secondary institutions.
  • Sales of food by a nonprofit organization if there are no facilities for food consumption on the premises and the food is not sold within an enclosure for which a charge is made for admission.
  • Sales of food served by a volunteer fire, ambulance or rescue company or an auxiliary if the proceeds are used to support the organization.
  • Sales of magazine subscriptions in a fundraising activity by an elementary or secondary school in the state if the net proceeds are used solely for the educational benefit of the school or its students.
  • Sales made in hospital thrift shops operated entirely by volunteers selling only donated articles for the benefit of the hospital.
  • Sales made by an auctioneer for a bonafide church, religious organization or other non-profit organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code if the proceeds are used for exempt purposes. Unless the organization is a church or religious organization, only the portion of the price that qualifies for a deduction as a charitable organization under IRS quidelines is exempt from the sales and use tax.
  • Sales by out-of-state nonprofit organizations that are exempt from income tax under Section 501(c)(3) or Section 501(c)(19) of the Internal Revenue Code that have a location in Maryland or are located in an adjacent jurisdiction and satisfy one of the following conditions:
    • The organization provides its services in Maryland on a routine and regular basis;
    • The adjacent jurisdiction does not impose a sales or use tax on a sale to a nonprofit organization made to carry on its work; or,
    • The adjacent jurisdiction has a reciprocal exemption from sales and use tax for sales to nonprofits located in adjacent jurisdictions similar to Maryland's exemption.

Only churches, religious organizations and government agencies may use an exemption certificate to purchase items for resale without paying sales and use tax. All other organizations must issue a resale certificate, with their Maryland sales and use tax license number, to purchase items tax-free for resale.

Any organization making ordinarily taxable sales of tangible personal property, including meals, must obtain a sales and use tax license and collect and remit the tax, even though the organization has an exemption for items it purchases. The organization must collect tax on sales to anyone, including members, students and beneficiaries, even if the item has been donated or sold at or below cost.

Tax should not be collected on sales of goods to PTAs and similar groups associated with non-public schools if the property will be donated to an exempt school. Local PTAs may use their school's exemption certificate when claiming exemptions. Tax should be collected, however, on sales of items to PTAs that they will use in their operations, but which are not donated to schools.

NOTE: The Maryland sales and use tax exemption certificate applies only to the Maryland sales and use tax. A nonprofit organization that is exempt from income tax under Section 501(c)(3) or Section 501(c)(19) of the Internal Revenue Code, and holds a valid Maryland sales and use tax exemption certificate, is still be liable for other state and local taxes in Maryland, such as local hotel taxes.

Government employees may use the Maryland sales and use tax exemption certificate to make purchases of goods for the government unit. However, the sales and use tax law does not expressly exempt sales to a government employee who, for example, rents a hotel room or purchases a meal and pays for it with cash, personal check or personal credit card. Those employees are required to pay the Maryland sales and use tax to the vendor.

The tax is due on those transactions even though the employee may have documentation provided by the government agency that the purchaser is a government employee or may be reimbursed by the government for those expenses.

Federal government charge card purchases

Federal government purchases made by using the following charge cards administered by the U.S. General Services Administration's GSA SmartPay charge cards are exempt from the Maryland sales and use tax since they are billed directly to the federal government:

  • Purchase MasterCard cards with the first four digits of 5565 or 5568.
  • Purchase VISA cards with the first four digits of 4614 or 4716.
  • Fleet VISA cards with the first four digits of 4486.
  • Fleet MasterCard cards with the first four digits of 5563 or 5568.
  • Fleet WEX cards with the first four digits of 6900 or 7071.
  • Fleet Voyager cards with the first four digits of 7088.
  • Travel MasterCard cards with the first four digits of 5565 or 5568, and with a sixth digit of 0, 6, 7, 8 or 9.
  • Travel VISA cards with the first four digits of 4486, 4614, or 4615, and with a sixth digit of 0, 6, 7, 8 or 9.

Purchases made by using the following charge cards are subject to the Maryland sales and use tax since they are billed directly to the individual and are not treated as direct sales to the federal government:

  • Travel MasterCard cards with the first four digits of 5565 or 5568, and a sixth digit of 1, 2, 3 or 4.
  • Travel VISA cards with the first four digits of 4486 or 4614, and a sixth digit of 1, 2, 3 or 4.