Maryland: Sales Tax Handbook
What purchases are taxable in Maryland?
The taxability of various transactions (like services and shipping) can vary from state to state, as do policies on subjects such as whether excise taxes or installation fees included in the purchase price are also subject sales tax. This reference is here to help answer your questions about what is and is not subject to the Maryland sales tax.
Contents1.) Taxability of Goods and Services
- General Maryland taxability guidelines
- Are services subject to sales tax?
- Is shipping & handling subject to sales tax?
- Are drop shipped items taxable?
Section 1: Taxability of Goods and Services
What transactions are generally subject to sales tax in Maryland?
In the state of Maryland, sales tax is legally required to be collected from all tangible, physical products being sold to a consumer. Several examples of exceptions to this tax are foods considered to be snack foods, most prescription medications, in addition to most medical devices, and all types of farm equipment.
This means that someone selling textbooks and school supplies would be required to charge sales tax, but an individual who sells farm equipment would not be required to charge sales tax on most of their products.
Are services subject to sales tax in Maryland?
In the state of Maryland, services are not usually taxable. While most services are exempt, there are a few exceptions. For example, a service who's work includes creating or manufacturing a product is very likely considered to be taxable, and thus you would most likely have to pay sales tax on the service.
You can find a table describing the taxability of common types of services later on this page.Top
Are shipping & handling subject to sales tax in Maryland?
In the state of Maryland, the laws regarding tax on shipping and handling are pretty simple. The state does not usually require sales tax on the shipping costs. So long as the shipping costs are stated separately on the invoice, no tax on the cost is necessary.
However, it must be noted that if you choose to include the cost of shipping in the price of the product being sold, the shipping cost is considered to have become a part of the total taxable transaction, and shipping charge loses it's exemption and is considered to be taxable.
Are drop shipments subject to sales tax in Maryland?
"Drop shipping" refers to the common business practice in which a vendor, often in a different state, makes a sale of a product which is shipped to the end-user by a third party supplier hired by the initial vendor. In Maryland, drop shipments are generally exempt from sales taxes.
Section 2: Taxability of Various Items in Maryland
This table shows the taxability of various goods and services in Maryland. If you are interested in the sales tax on vehicle sales, see the car sales tax page instead. Scroll to view the full table, and click any category for more details.
|Products on Amazon.com||TAXABLE *|
|Food and Meals|
|Leases and Rentals|
|Motor Vehicles||TAXABLE *|
|Tangible Media Property||TAXABLE|
|Manufacturing and Machinery|
|Utilities & Fuel||EXEMPT|
|Medical Goods and Services|
|Newspapers and Magazines|
|General Occasional Sales||EXEMPT *|
|Motor Vehicles||EXEMPT *|
|Optional Maintenance Contracts|
|General Optional Maintenance Contracts||EXEMPT|
|Parts Purchased for Use in Performing Service Under Optional Maintenance Contracts||TAXABLE|
|Pollution Control Equipment|
|General Pollution Control Equipment||TAXABLE *|
|Janitorial Services||TAXABLE *|
|Software and Digital Products|
|Canned Software - Delivered on Tangible Media||TAXABLE|
|Canned Software - Downloaded||EXEMPT *|
|Custom Software - Delivered on Tangible Media||EXEMPT|
|Custom Software - Downloaded||EXEMPT|
|Customization of Canned Software||EXEMPT *|
|Vending Machine Sales|
* See notes in category taxability page for details
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