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Sales Tax Obligations of Sellers in Maryland

April 13, 2006

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Maryland imposes various requirements on sellers doing business in Maryland. We recommend that you go through the items below to help you with the most frequently asked questions concerning sellers and sales and use tax issues.

Procedure for accepting resale certificates. As a seller, your responsibility to collect the sales and use tax is waived if the purchaser provides you with a signed resale certificate. The certificate must be in the required format, includes the purchaser's name, address, registration number, and state that the tangible personal property or taxable service is bought for the purpose of resale.

Procedure for accepting blanket certificates. As a seller, you may accept a blanket resale certificate from a purchaser that makes repeated purchases. This blanket certificate will relieve the burden of executing a separate certificate for each individual tax-exempt purchase as long as there is no significant change in the operations. You provide the resale exclusion on subsequent sales by obtaining the purchaser's Maryland registration number on the purchase order. An example blanket resale certificate is provided in sales and use tax obligations of purchasers.

Sales and use tax liability for out-of-state mail order and catalogue retailers. Maryland does not have a statute that specifically taxes out-of-state mail order and catalogue sellers. You will be responsible for paying this tax only if you have physical presence within Maryland. To determine if you have physical presence, ask yourself the following:

• Do I have retail facilities, a warehouse or any office space in Maryland? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
• Do my employees or I enter Maryland for purposes of taking and transmitting orders from Maryland? If your employee or independent contractor goes into Maryland to take or transmit orders your business may have physical presence in Maryland. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
• Do my delivery vehicles frequently enter Maryland for purposes of delivering property? Frequent deliveries in Maryland by your trucks will give you physical presence in Maryland.

Sales tax "bracket system." The following sales tax brackets have been issued by the state of Maryland.

If the taxable price is $1 or more, the tax rate is $.01 for each $.20 or part of $.20, plus $.05 for each exact dollar.

Absorbing the tax — using a "no sales tax" advertising strategy to drum up business. As a seller, you may not advertise, state, or otherwise hold out that any part of the sales and use tax:

• will be assumed or absorbed by you
• will not be added to the taxable price of tangible personal property or a taxable service, or
• will be refunded if added to the taxable price of tangible personal property or a taxable service

Claiming refund for excess tax payments. As a seller, if your refund claim does not exceed $250, you may request a refund by deducting the amount from the total tax due with any return. If your claim is for more than $250 or in excess of the amount of tax reported on the return, you must file a claim for refund. When you file a claim for refund, you must include supporting documents. Your claim for a refund of sales and use tax must be filed before four years from the date the tax was paid.

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