Registering for a sales tax permit in Maryland is an essential step for businesses that plan to sell taxable goods or services within the state. Maryland requires any business that sells tangible personal property or provides certain taxable services to collect sales and use tax from customers. To do so legally, you must first obtain a Sales and Use Tax License, commonly referred to as a sales tax permit. This license allows businesses to collect the appropriate tax from customers and remit it to the state. The process of registering for a sales tax permit in Maryland is relatively straightforward, but it’s important to follow all the necessary steps and understand your obligations as a business owner.
Step 1: Determine if You Need a Sales Tax Permit
The first step in the registration process is determining whether your business is required to collect sales tax. In Maryland, businesses must register for a sales tax permit if they:
- Sell tangible personal property, such as furniture, electronics, clothing, or other physical goods.
- Provide certain taxable services, such as telecommunications, security, or commercial cleaning.
- Lease or rent tangible personal property, such as vehicles or machinery.
- Sell digital products, including software, e-books, or online media.
Even if your business is not physically located in Maryland, you may still be required to collect sales tax if you have nexus in the state. Nexus is created if your business has a significant connection to Maryland, such as having employees, storing inventory, or selling a certain amount of goods to Maryland residents (referred to as economic nexus). Currently, businesses with sales exceeding $100,000 or more than 200 transactions in Maryland must register for a sales tax permit and collect sales tax.
Step 2: Gather Required Information
Before starting the registration process, it’s important to gather all the necessary information about your business. Maryland requires the following information to complete your registration:
- Legal business name and any trade names (also known as DBAs or “Doing Business As” names).
- Business entity type (e.g., sole proprietorship, corporation, LLC).
- Federal Employer Identification Number (EIN) issued by the IRS. If you’re a sole proprietor, your Social Security number can be used instead.
- Business location address and mailing address, if different.
- Contact information for the business owner or responsible party.
- Start date of business operations in Maryland.
- Estimated monthly sales, which will help determine your filing frequency.
Step 3: Register Online with the Maryland Comptroller
Maryland’s Department of Revenue, also known as the Comptroller of Maryland, handles the issuance of sales tax permits. To begin the registration process, you’ll need to visit the Comptroller’s website and use the Maryland Combined Registration Online Application system. This online system allows you to register for multiple tax types at once, including sales tax, income tax withholding, and unemployment insurance.
Follow these steps to complete the online registration:
- Visit the Maryland Comptroller’s website and navigate to the Combined Registration Application page.
- Create a user account if you do not already have one, or log in to your existing account.
- Select Sales and Use Tax License as the tax type you are registering for.
- Complete the required fields with your business information, including legal name, address, EIN or Social Security number, and contact details.
- Answer questions about your business operations, including the nature of the goods or services you sell and the estimated volume of sales.
- Review and submit your application.
Once your application is processed and approved, the Comptroller of Maryland will issue your Sales and Use Tax License. You should receive this license via mail within 7-10 business days.
Step 4: Display Your Sales Tax Permit
After receiving your sales tax permit, you must display it in a visible location at your place of business. This ensures that customers and officials know that your business is authorized to collect sales tax. If you have multiple business locations in Maryland, you will need to display a copy of the permit at each location.
Step 5: Begin Collecting and Remitting Sales Tax
With your sales tax permit in hand, you can now begin collecting sales tax on taxable sales. In Maryland, the state sales tax rate is 6% for most goods and services, while the tax rate for certain rentals, such as short-term vehicle rentals, is 11.5%. If you are selling taxable items online to customers in Maryland, you are also responsible for collecting sales tax on those sales, provided you meet the economic nexus thresholds.
As a registered business, you are required to remit the collected sales tax to the state. The due dates for filing and remitting sales tax depend on your business’s filing frequency, which is assigned by the Comptroller based on your estimated monthly sales. Most businesses file sales tax returns either monthly or quarterly, but businesses with very low sales volume may be allowed to file annually.
Sales tax returns and payments can be submitted electronically using the Comptroller’s bFile system, which allows businesses to file returns, make payments, and access account information online. It’s important to file your returns and remit payments on time to avoid penalties and interest.
Step 6: Stay Compliant and Renew Annually
Maryland does not require businesses to renew their sales tax permits annually, but it’s important to keep your business information up to date with the Comptroller’s office. If you change your business name, address, or ownership structure, you must notify the Comptroller to ensure your permit remains valid. Additionally, businesses that close or cease operations in Maryland are required to cancel their sales tax permit.
To remain compliant, it’s also important to regularly check for any changes in Maryland’s sales tax laws, including changes to tax rates, exemptions, or filing requirements. Failing to follow these regulations could result in fines, penalties, or revocation of your sales tax permit.