Frequently Asked Questions

Below you will find frequently asked questions concerning the Sales and Use tax.

Yes. Every time you purchase taxable tangible goods, whether in person, over the phone, or on the Internet, the purchase is subject to Maryland's 6 percent sales and use tax if you use the merchandise in Maryland. If you make a tax-free purchase out of state and need to pay Maryland's 6 percent use tax, you should file the Consumer Use Tax Return.

When you purchase goods from out-of-state businesses, they are not required to collect Maryland's sales and use tax unless they have a physical location, or deliver services, in Maryland. For more information, see Maryland's Sales and Use Tax

No. A store coupon is not included in the taxable price unless the vendor can get reimbursement from another source. Manufacturers' coupons are included in the taxable price since a store can obtain a reimbursement from the manufacturer.

For example, if you had a Mars grocery store coupon that was redeemable only at a Mars store - and not Food Lion, Giant or any other food store - the coupon would not be included in the taxable price. On the other hand, if you had a Welch's Grape Juice coupon that you could use in any store, then that coupon would be included in the taxable price.

No. Energy Star-rated clothes washers, refrigerators and air conditioners sold in Maryland are not exempt from the Maryland sales and use tax.

There is a tax-free three-day weekend during which the state sales tax will not apply to the sale of any Energy Star Product listed below, or solar water heater. The tax-free weekend for 2013 will occur the weekend of February 16, 2013, through February 18, 2013.

Energy Star Product means an air conditioner, clothes washer or dryer, furnace, heat pump, standard size refrigerator, compact fluorescent light bulb, dehumidifier, or programmable thermostat that has been designated as meeting or exceeding the applicable Energy Star Efficiency requirements developed by the U.S. Environmental Protection Agency and the U.S. Department of Energy.

In general, food sales are subject to Maryland's 6 percent sales and use tax unless a person operating a substantial grocery or market business sells the food for consumption off the premises and the food is not a taxable prepared food. A grocery or market business is considered to be "substantial" if the sales of grocery or market food items total at least 10 percent of all food sales.

For more information, see Sales of Food

No. The Maryland sales and use tax does not apply to the sales of cars or boats since those items are already subject to titling taxes. Sales of motor vehicles are subject to the Maryland motor vehicle titling tax which is administered by the Maryland Motor Vehicle Administration. Boat sales are subject to a boat titling tax which is administered by the Maryland Department of Natural Resources. On the other hand, the sales and use tax does apply to car and boat rentals, under different tax rates. 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.

It depends. Charges for warranties, maintenance, service agreements and insurance are taxable if the buyer is required to purchase them or they are already included in the price of the merchandise. However, if the sale could be completed without paying these charges, then the charges are not taxable.

Private vendors or franchisees selling on military bases, or other United States Government properties, must charge the sales tax on all sales of tangible personal property and taxable services statutorily subject to the tax. The tax must be charged on sales to military and other Government personnel as well as civilians. There is an exemption from the tax for sales made at a vending machine facility operated under the Maryland Vending Program for the Blind that is located on property on military bases.

Sales made by the United States Government, or any of its agencies, on Government property are exempt from the sales and use tax, regardless of whether the purchasers are military and Government personnel or civilians.

For example, sales of food by a fast food vendor on a military base are subject to the tax if the vendor or franchisee is ABC Company. The same sales made on a military base where the vendor or franchisee is the United States Government, or an agency of the Government, are not subject to the tax.

Below you will find frequently asked tax questions concerning out of state purchases.

Basically, yes. Maryland does, however, grant a credit for the sales tax paid to another state up to the amount of the Maryland tax. In addition, a 10 percent depreciation allowance may be taken for each full year the property is used by the purchaser before being brought to Maryland.

Maryland grants a credit for sales tax paid to another state up to the amount of Maryland's six (6%) percent sales and use tax liability.

For example, if you paid a four (4%) percent sales tax to another state, you would be liable only for the difference, or two (2%) percent Maryland sales and use tax when you brought the property into Maryland. If you paid a six (6) or higher percent sales tax to another state, you would not be liable for Maryland sales and use tax when you brought the property into Maryland.

Yes. However, you may claim a ten (10%) percent depreciation allowance for each full year you used the property before you brought it to Maryland. Only the depreciated value is subject to tax.

The tax applies only to the cost of materials and purchased fabrication services, not to the full market value of the goods. The value of your labor is not taxed.

Below you will find frequently asked tax questions concerning flea markets.

Yes. Maryland law requires that vendors display their licenses at any location where sales are made. This will save you valuable selling time because representatives of the Comptroller's Office do not have to ask for your registration number.

The tax is on the transaction or sale and not on the property sold. The same item will generate tax each time it is sold unless it is specifically sold for resale.

Yes. Nonprofit organizations must collect tax on merchandise they sell, even if the goods are donated to them. Private individuals must also collect tax even if they plan to donate the proceeds to a nonprofit organization. Private individuals are not eligible for a sales and use tax exemption certificate. Sales by religious organizations and sales of food by volunteer fire companies and veterans' organizations are exempt.

Always collect tax on sales to other dealers unless they present you with a resale certificate bearing their Maryland sales tax registration number. However, out-of-state dealers who are not required to collect the Maryland tax may use their out-of-state sales tax registration number on a resale certificate to purchase antiques and used collectibles. Dealers from states that do not impose a sales tax may provide a valid trader's license or comparable document. Resale certificates are not valid for cash, check or credit card sales of less than $200 unless the product is delivered to the customer's place of business.

Yes. Effective January 3, 2008, a vendor may assume and 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 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.

Below you will find frequently asked tax questions concerning food and beverages.

Yes. However, when calculating if a business meets the 10 percent threshold for a substantial grocery or market business, you may not include sales of single servings, heated or prepared food or sales to be consumed on the premises.

Yes. A caterer serving food at a customer's premises must collect the tax on the food sold. A caterer must collect the tax in this situation even if the caterer also conducts a substantial grocery or market business.

Yes. Sales of food to patients in a hospital when the food charges are included in the regular room rate are exempt. Sales of food and beverages on vehicles operating in interstate commerce are exempt. In addition, the tax does not apply to a sale of crabs for consumption off the premises where sold. Sales of seafood to be consumed off the premises where sold are also exempt if the seafood is not prepared for immediate consumption.

No. For sales and use tax purposes, soft drinks, bottled water, alcoholic beverages, candy and confectionery are not "food." The sale of any of these items is, therefore, not entitled to any of the exemptions for sales of food, including the exemptions for sales of food by volunteer fire companies and veterans organizations. Neither water nor ice is food, although they may be treated as food when sold as components of food.

The tax does not apply to eligible food purchased with federal food stamps. Food stamp eligible food encompasses everything that is considered food for sales and use tax purposes, plus soft drinks, candy, confectionery, water, ice and otherwise taxable and prepared foods.

If a customer purchases both taxable and nontaxable food stamp eligible food with a combination of food stamps and cash, credit card or debit card, the vendor must apply the food stamps to the eligible taxable items first, and then any remaining food stamps to the eligible nontaxable items. After application of the food stamps, the balance of the eligible taxable items paid for with cash, credit card, or debit card is subject to tax.

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.

You must clearly document the reason for all tax-exempt sales. Otherwise you will be held responsible for uncollected tax, plus penalty and interest. You should establish procedures to obtain valid resale certificates at the point of sale, and review your files periodically for accuracy and completeness.

Make certain that you do not allow resale exclusions on cash, check or credit card sales of less than $200 when you do not deliver the goods sold directly to the buyer's retail place of business.

You 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.

No. Retailers licensed and remitting taxes in other states may apply to the Maryland Comptroller's Office for a refund.

However, an out-of-state vendor who has been issued a temporary permit to collect the Maryland tax may use the number on that permit to make tax-free purchases for resale at the show for which the permit was issued. Temporary permits bear six-digit numbers and are issued by the comptroller's Special Events Section.

No. If you frequently deal with the same supplier, you may provide that supplier with a blanket resale certificate stating that all purchases are for resale. Then all you have to do is give the supplier your sales and use tax registration number.

No. Exemption certificates are issued by the Comptroller of Maryland to qualifying nonprofit organizations and government agencies to make purchases for their own use. The exemption certificate is a wallet-sized card bearing the holder's eight-digit exemption number. Certificates issued to nonprofit organizations have a specific expiration date, presently September 30, 2017 for religious, educational and charitable organizations, cemeteries, credit unions, and volunteer fire companies or rescue squads and September 30, 2017 for certain veterans organizations and their auxiliaries and units. Certificates issued to government agencies have no expiration date. Organizations and government agencies presenting exemption certificates are exempt from the sales and use tax on purchases of materials and supplies to carry out their work. On the other hand, a resale certificate allows a person to make tax-free purchases for resale, not for use.

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.

In a typical transaction, you would sell merchandise to a vendor who is not registered to collect Maryland sales and use tax. The unregistered vendor asks you to deliver the merchandise to a customer in Maryland. In this case, you must:

  • Require the vendor to obtain a Maryland sales and use tax license and provide a valid resale certificate; OR
  • Charge the vendor the tax based on the amount of the sale. You are responsible for collecting or documenting the tax on your sale to the vendor.