What Is Maryland Sales and Use Tax?
Maryland Sales Tax is a tax assessed by the Comptroller of Maryland and collected by businesses who provide goods and certain services. While the sales tax is actually due from the person or entity that is purchasing the taxable item or service, sales tax is collected by the seller who is also responsible for the taxes’ transmissions to the Comptroller of Maryland. In Maryland, the seller is tasked with collecting the tax on a daily basis and is required to file a monthly sales tax return with Comptroller of Maryland. When each month’s sales tax return is filed by the vendor, the amount due is also paid. The sales tax liability is based upon the amount of sales in a given month of taxable items and taxable services.
Maryland Use Tax is a tax paid by purchasers on taxable items from a supplier located outside of Maryland, then the Maryland taxpayer is required to a pay a tax on those out-of-state items to the Comptroller of Maryland. This Maryland Use Tax occurs because when an out of state business sells an item that is not used in the state where the seller is located, the business is not required to collect a sales tax when the item is shipped out of the state. While business could save thousands of dollars by ordering items from out of state suppliers, the states would lose thousands of dollars on those sales. Therefore, states (including Maryland) have a use tax which requires a tax to be paid to the state on the out of state purchases — the same percentage as the state’s sales tax.
When a Maryland Sales and Use Tax Audit occurs, the Comptroller generally looks at the taxpayer over a three-year period. The Comptroller of Maryland generally performs the audit for a period of three to four months. If there are errors found during the sample period, the Comptroller of Maryland will then apply that error factor via a specific Comptroller-created equation. During these Sales and Use Tax Audits, the Comptroller of Maryland will usually review several types of documents from the taxpayer. The Comptroller of Maryland will generally review all the income figures for each month during the sample period. The ending gross-sales figure will then be compared to the amount that was reported on the sales tax return that was filed with the Comptroller of Maryland.
A Maryland sales and use tax audit can be expensive for a Maryland taxpayer, especially if the taxpayer has made error in their calculations. However, a finding of improper Maryland sale and use tax calculation by the taxpayer can also be extremely costly to the business as well as costly to the owner and person responsible for the sales and use tax of the business. Additionally, owners or operators of businesses can be held personally liable for outstanding sales and use taxes. The Comptroller of Maryland will do everything possible to collect these sales and use taxes and will assess as many people as possible so it can collect the amount due.
Each Tax Attorney at Longman & Van Grack can address all tax matters for every type of Maryland including Maryland sales and use taxes. Additionally, Longman & Van Grack’s tax attorneys can address any type of Comptroller of Maryland audit. You can meet with our firm’s Maryland tax attorneys at our offices are in Bethesda and Rockville, Maryland. Call our attorneys at (301) 291-5027 today.