Sales Tax Guide for Maryland

What Is Taxable in Maryland?

In Maryland, tangible personal property is generally subject to sales tax. However, certain items are exempt, including groceries, prescription medicines, and medical devices. Moreover, some services like fabrication, commercial cleaning, and certain online sales may be taxable.

If your business engages in selling taxable goods or services, it is essential to collect and remit sales tax accurately. Businesses should also be aware of the necessity to pay use tax when purchasing out-of-state products for use in Maryland.

Who Needs to Collect Sales Tax?

In Maryland, sales tax must be collected by:

• Retailers with a physical presence in Maryland
• Online sellers meeting the state’s economic nexus threshold
• Service providers offering taxable services

Maryland enforces a $100,000 sales or 200 transactions economic nexus threshold. Businesses surpassing these limits, regardless of a physical presence in Maryland, must register and collect sales tax. Those failing to register and comply could face penalties and back taxes, which is why doola’s Bookkeeping service is pivotal in maintaining regulatory compliance and avoiding legal troubles.

How to Register for a Sales Tax Permit in Maryland

Registering for a sales tax permit in Maryland involves the following steps:

1. Prepare documentation such as your EIN, business license, and business details.
2. Visit the Maryland Comptroller’s website.
3. Complete the sales tax registration process online.
4. Receive your sales tax license and commence tax collection.

Failure to obtain a sales tax permit before making taxable sales is illegal, so ensure you’re registered. For those needing assistance, doola’s bookkeeping professionals can provide support to navigate bureaucratic challenges, allowing you to focus on growing your business confidently.

How to Calculate Sales Tax in Maryland

To accurately calculate sales tax in Maryland, follow these steps:

Step 1:
Identify the appropriate sales tax rate given both your and the buyer’s location.

Step 2:
Calculate this rate at the point of sale for accuracy.

Step 3:
Maintain meticulous records of all taxable transactions.

Maryland requires monthly, quarterly, or annual sales tax return filings based on revenue levels. Stay informed about filing deadlines to prevent accruing late fees.

Different jurisdictions within Maryland may impose varying local tax rates. Hence, ensure to incorporate these into your calculations when applicable.

Common Sales Tax Exemptions in Maryland

Maryland provides several sales tax exemptions to specific entities and purchases, such as:

• Purchases intended for resale with a valid resale certificate
• Sales to nonprofit organizations
• Certain agricultural and manufacturing machinery

To utilize exemptions, ensure the correct exemption certificates are completed and meticulous records maintained. Misapplication of exemption certificates could result in audits and penalties.

Remote Seller and Marketplace Sales Tax Rules in Maryland

Maryland enforces particular sales tax regulations for remote sellers and marketplaces like Amazon, eBay, Shopify, and Etsy.

The economic nexus threshold is established at $100,000 in sales or 200 transactions, necessitating businesses that exceed these thresholds to comply with Maryland’s remote seller sales tax regulations.

Additionally, marketplace facilitators are required to collect and remit sales tax on behalf of sellers using their platforms, streamlining compliance for individual sellers.

What Triggers a Sales Tax Audit

The Maryland Comptroller may initiate sales tax audits for reasons such as incomplete or inaccurate sales tax reporting, repeated late payments, discrepancies between reported and actual revenue, or incorrect use of exemption certificates.

Minimize audit risk by maintaining thorough sales records, exemption details, and tax payment receipts. Regular internal reviews can help ensure precision and compliance with tax filings.

FAQs About Sales Tax in Maryland

Here are some frequently asked questions regarding Maryland sales tax:

Are digital goods taxed in Maryland? 

Yes, certain digital goods are subject to tax in Maryland. Be sure to consult state guidelines for specifics.

Do out-of-state businesses need to collect Maryland sales tax? 

If they surpass the $100,000 in sales or 200 transaction thresholds, then yes.

What if I overcharge or undercharge sales tax? 

Adjustments may be required, including customer refunds or correction payments to the state. Precise record-keeping is crucial.

Are services taxable in Maryland? 

Many services are exempt; however, certain services, like fabrication or commercial cleaning, may be taxed.

Stay Compliant With doola

Navigating sales tax compliance doesn’t need to be daunting. Staying informed and utilizing effective tools can help avoid penalties, keeping your business on an even keel.

doola can extend expert guidance and resources ensuring compliance, aiding businesses with innovative financial solutions, tax consulting, and bookkeeping support.