Do you need to collect and remit sales tax in Maryland?
Understanding your sales tax obligations is crucial to managing your business, especially in a digital age when the rules and regulations are often changing. In Maryland, vendors (or businesses) are responsible for collecting and remitting sales tax if they have a physical presence or nexus in the state. Additionally, out-of-state businesses may need to add sales tax to their to-do list if they meet certain sales requirements—more on this later. However, Maryland does offer sales tax exemptions and considers some services and items nontaxable. Here are a few examples:
- Menstrual products
- Baby products such as bottles, diapers, wipes, and infant car seats
- Oral hygiene products
- Medical devices such as thermometers, pulse oximeters, and blood pressure monitors
- Construction materials, (when bought with an exemption issued by the Maryland Comptroller)
You can find a full list of tax exemptions here.
Do you have sales tax nexus in Maryland?
Sales tax nexus refers to the connection between a seller and a state, which requires the collection of sales tax from customers and the remittance of that tax to the state. Businesses with nexus in Maryland include those with a physical presence, (such as a store or warehouse), or economic presence, such as reaching a certain threshold of sales or transactions.
Physical sales tax nexus in Maryland
Under Maryland law, people who sell or conduct business activities in the state are considered vendors. Typically, a vendor will automatically have physical nexus in Maryland if they operate or have employees within state lines. Some other examples physical nexus include:
- Sales or sample rooms
- Agents, representatives, or salespersons operating in the state
- Using vehicles to sell or deliver in the state
Economic sales tax nexus in Maryland
Out-of-state vendors or remote sellers have economic sales tax nexus in Maryland if they meet one or both criteria below:
- Exceeding $100,000 of gross revenue from deliveries in the state, or;
- Having 200 or more separate transactions for delivery into the state.
The economic thresholds apply to both the current and previous calendar year, meaning that if you surpass these limits at any point, you must register to collect and remit sales tax.
Determining nexus for your business can be a complex and daunting task. With many factors to consider, many businesses struggle to navigate the intricacies of nexus determination, and even end up paying thousands of dollars to accounting firms to get answers. That’s why we offer nexus determination as an a-la-carte or package deal for businesses at affordable prices. With over 20 years of experience in federal and state tax and accounting laws, we’re a trusted partner for many businesses in need of nexus review services. Contact us now for a consultation!
Are marketplace facilitators required to collect and remit sales tax in Maryland?
In Maryland, marketplace facilitator laws have been put in place to regulate online sales and ensure that sales tax is collected and remitted appropriately. To ensure that local businesses are not at a disadvantage by unfair e-commerce tax reporting, marketplace facilitators are required to collect and remit sales tax on behalf of their third-party sellers, unless the seller is already registered with Maryland.
It is important to note that marketplace facilitators are under the same economic threshold requirements as any other remote retailer, which is over $100,000 in sales or 200 transactions into Maryland. When choosing to sell through a facilitator, ensure that you have documentation of their Maryland registration.
What platforms are marketplace facilitators?
Not sure what defines a marketplace facilitator? In short, marketplace facilitators are companies that provide a platform or service for third-party sellers (you) to sell their products or services to customers. The facilitator collects payment from the customer, processes the transaction, and may also manage shipping and returns.
Filing Maryland Sales Tax
Before you can file Maryland sales tax returns, you will need to register to collect and remit sales tax in the state. To make tax registration simple for businesses, Maryland offers a Combined Registration Online Application which will register your business for multiple tax accounts including a sales and use tax license and a Use tax account. Additionally, if you prefer paper forms, there is a downloadable version of this application that you can print and send to the Maryland Comptroller.
After your registration is processed and you receive a sales and use tax license, you will file your tax returns based on the frequency Maryland assigns to you. Initially, sales and use returns are due on a quarterly basis, but the Comptroller may change that frequency based on the amount of tax paid.
Maryland encourages taxpayers to use their online bFile system to file returns, but paper returns are still available for download or via emailed request. It is important to remember that sales and use tax returns must be filed even if you have no tax due for the filing period.
If you file your sales tax return and pay the tax due before or by the due date, you are allowed to keep a portion of the sales tax as a timely discount. The allowable discount is:
- 1.2% of the first $6,000 collected
- 0.9% for any amount above $6,000
When are sales tax returns due in Maryland?
There are four filing frequencies in Maryland: monthly, quarterly, bi-annual and annual. Maryland assigns a quarterly filing frequency to all new business taxpayers, which is subject to change depending on tax liability and payment. The more sales tax a business collects, the more often a business will need to file.
Returns are due on the 20th day of the month following the end of a filing period. If the 20th falls on a weekend or legal holiday, returns are due the next business day. Check out the table below for a breakdown of filing frequencies and the associated periods.
|Filing Frequency||Due Date||Applicable Tax Periods|
|Monthly||20th of the month following the report period||1st – last day of every month|
|Quarterly||20th of the month following the end of the quarter||Quarter 1: Jan 1 – March 31 |
Quarter 2: April 1 – June 30
Quarter 3: July 1 – Sept. 30
Quarter 4: Oct 1 – Dec 31
|Bi-Annual||20th of the month following the end of the semi-annual period||1st Half: Jan 1 – Jun 30 |
2nd Half: July 1 – Dec 31
|Annual||January 20th of the following year||January 1 – December 31|