How to Register for a Sales Tax Permit in Maryland

It is often said that there are two types of business people: those that are eager to get things going and be in the lead, run their own company, and those that are happy to follow and are pretty much scared of the idea of running their own business. However, is the idea of running your own business really so scary? There are, in fact, many advantages to it. For example, running your own business allows you to work flexible hours. In the beginning, you might be working overtime, but if you do things correctly and lead your business to success and it actually starts working for you, you are free to do how much you want, when you want. This will result in a lot more free time and if you have a family, a lot more family time, many entrepreneurs are said to be missing.

You might have been working as an employee for years, acquiring skills and business knowledge. You have found your passion in a specific market and you are sure you could thrive in it. Use that passion, because this is actually what running your own business is about. And by doing this you are calling the shots, doing things the way you want them to be done, creating a new product or a company from zero and building it up. Depending on the scale of the operation you would like to run, you will be the one creating jobs, meeting new people and building a team around you that shares the passion, the drive for success.

One state that you might be keen on starting your business in is Maryland. Due to its strategic location, with the major port of Baltimore and four international airports, it is a perfect place to start a business with a view to building it up to a globally-known name. This guide will show you the steps for starting a new business in Maryland, as well as the legal framework within which you have to arrange your business. It will also focus on sales tax permit and exemptions, which will be of interest to small businesses and Amazon sellers who plan on purchasing cheap wholesale merchandise to resell online.

Covering the Basics

Following your passion is important when it comes to starting your own business and deciding to go alone. You might have spent some years as an employee, learning at every opportunity and taking every position you have been assigned to as a chance to learn a new skill and equip yourself for the ultimate goal, to run your own company.

There are usually a few questions one should ask themselves when considering starting a new business of their own. Are you really ready? Do you have the necessary skills and knowledge? What do you know about the market you’re planning to enter? What do you know about the products or services you plan on providing? Is that business model really sustainable? These are only some of the questions that might pop into your head when you are preparing to start your own business. A few things are absolutely essential: knowing the market and having a well thought out business plan.

If you have a certain passion and would like to jump into a certain market, make sure you know the market dynamics, the relation between the supply and demand. Make a checklist that will allow you to go over all the aspects of that market, and the products you are interested in working with. If the initial research garners positive results you are good to go to the next step of devising a business plan. However, if you do find that the market is already saturated and even bordering on oversupply, maybe it is better to focus on more specific segments of that market that might be underserved, starting small in a niche market gives you the opportunity to acquire valuable experience and underserved markets also are not as tightly competed as some others might be. This means you will have a ‘hungry’ customer base from the start. Once you build a strong reputation and a customer base it is easier to expand into any new markets you might fancy.

Whether you are able to follow your passion from the start or go a bit of a longer way around by starting from a niche market you know a little less about, you will certainly need a business plan. This is an essential part of the business starting process for a number of reasons. It serves as a guideline for your registration process allowing you to track your progress. It should include market research results, feasibility studies, predicted revenue, expenses, and income. Due to the information it contains, the business plan is one of the first documents banks or any other financial institutions will require in order to grant a loan or invest in your business.

If you’ve answered all the previously posed questions affirmatively, found your target market and customer base, devised a strong business plan it is time to look into the legal framework for new business registration the state of Maryland has set in place.

Registering a New Business in Maryland

When it comes to the regulatory requirements, the first step you have to take when starting a business in Maryland is to determine what sort of a business structure suits your business best. Consider the type of business you will do, the scale of operation and whether you will be needing employees or not. According to Maryland’s State Department of Assessments and Taxation (SDAT), the most common business structures chosen in the state are the sole proprietorship, partnership, corporation and the limited liability company. Each one of these entity types has its own advantages and disadvantages. In order to make sure you are choosing the best one for your business, it is advisable to consult an attorney, accountant or a business advisor.

In general, a sole proprietorship is the easiest legal structure to set up and the easiest to maintain. It gives its owner complete control of the business. A sole proprietorship is thought of as a test bed for a business idea before you start growing your business. The downside of a sole proprietorship is that there is no distinction between your business assets and liabilities and your personal assets and liabilities. The debts of your business are automatically your debts.

If you plan on doing business with one or more partners, a partnership is the best legal structure for it. There are limited partnerships and limited liability partnerships. In terms of structure, a limited partnership has one general partner with unlimited liability while all other business partners have limited liability as well as limited influence and control of the business. Limited liability partnerships, on the other hand, provides limited liability to every partner in the business.

Corporations are the most expensive business structures to set up but they provide the most protection to every owner from personal liability. As a business, a corporation is separate from its owners.

Benefiting from the corporation and partnership business structure advantages, the limited liability company (LLC) also provides protection to the owner’s personal assets, which will not be affected in case of a bankruptcy. However, unlike corporations that can continue to function without any issues if a shareholder sells their shares and leave the company if an LLC shareholder decides to quit, many states require the structure to be either dissolved or reformed.

In any case, make sure you familiarize yourself with all the business structures and their advantages and disadvantages before choosing which one to register. If you have made your choice, you can register your business entity with the State Department of Assessments and Taxation (SDAT). Sole proprietorships and general partnerships do not require this registration, but they must comply with Maryland licensing and tax requirements.

Once the structure is selected, you will proceed with the registration of the business name. As a sole proprietor, you are not required to register a business name as you can operate with your name. If you plan on registering a trade name you can call the SDAT Corporate Name Availability line on 410-767-1330.

In order to streamline the registration process, the Maryland Department of Assessments and Taxation has set up a Maryland Business Express portal which enables a step-by-step process to register the business online instead of looking for the forms and filing them via mail.

With the business name registered, make sure you are applying for the right business permits and licenses. Maryland’s statewide licensing database, as well as a county licensing database, will provide you with an overview of the licenses your business may require. However, if you have any additional questions regarding the licensing requirements contact Maryland’s Department of Labor, Licensing & Regulation.

As noted above, all the businesses as well as the sole proprietorships and general partnerships, have to comply with the state’s licensing and tax requirements, which leads us into our next subject to discuss, the taxes and a sales tax permit. Before looking into sales tax permit requirements and the application process as a new business in Maryland, you are advised to obtain a Federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS). If you are registering your business through the Maryland Business Express platform, you will obtain the EIN during the registration process.

Maryland Sales Tax Permit

Maryland applies a 6 percent sales tax and a 9 percent alcoholic beverage tax for taxable purchases and a 6 percent and 9 percent alcoholic beverage tax when purchasing goods outside of Maryland for use in the state.

Tax requirements are the most complex field you have to negotiate when registering a business. As noted above, all businesses must comply with Maryland tax requirements. If you plan on purchasing merchandise wholesale to resell online, you might be required to apply for a sales tax permit. To determine whether you need to do so, first, you should check whether you have a Maryland Sales Tax Nexus. This requires you to have an office in the state, an employee, merchandise in a warehouse or ownership of personal or real property. You also have a sales tax nexus if you constantly enter the state for service or repair to tangible personal property. If you need more data on the sales tax nexus visit the Comptroller of Maryland’s website.

The next thing to determine is whether the products or services you are selling taxable in Maryland. In general, services are not taxable unless the service you provide is part of creating or manufacturing a product. Tangible personal property is taxable; however, there are exceptions like medicine and medical devices or farm equipment.

To apply for a sales tax permit you can either visit the Comptroller of Maryland Combined Registration Online application or download the form and mail it to the address listed in the Contact Details section below. You will have to provide a reason for applying for a sales tax permit, some business information, type of your business entity as well as the line of business you are engaged in, a date when you will start collecting taxes and you will have to name any other business owners. The process can take up to two weeks. However, once you do acquire your sales tax permit, you no longer need to renew it. While some business registration fees may apply, Maryland does not charge for the sales tax permit registration.

Sales Tax Exemptions in Maryland

Like many states, Maryland also provides certain tax exemptions. However, there are things you need to be careful with. The Comptroller’s Office issues sales and use tax exemption certificates to certain entities and this certificate is renewed every five years. Such organizations include nonprofit organizations, educational and religious organizations, government agencies, volunteer fire companies and rescue squads and a few more. This certificate allows for tax exemptions on purchases by these organizations.

However if you are among those who are expecting that purchase for resale are also exempt from sales and use tax, you have to be aware that this is only possible with a resale certificate. This certificate is not to be confused with the Maryland exemption certificate. According to the Comptroller of Maryland, ‘a resale certificate is a written statement that you provide stating that the merchandise or taxable service you buy will be resold in a taxable sale or that it will be incorporated into tangible personal property or used in a service that will be taxed when it is sold.’

The certificate has to include a statement, signed by the purchaser, that he is buying the merchandise in order to resell it. It also has to include the buyer’s name and address and the Maryland sales and use tax registration number. If you are a returning customer or have a long-term business relationship with a buyer, you might provide them with a blanket resale certificate that declares that all the purchases will be for resale. There is no specific form for a Maryland resale certificate; however, the Comptroller’s office provides a sample blanket certificate.

In case you find yourself on the receiving end of a Maryland resale certificate, you should keep the reason for the tax-exempt sale on record. You also have to be able to match the sales records with relevant resale certificates. Otherwise, you might be liable for uncollected taxes if you fail to provide adequate details during an audit. To avoid issues, you may verify the exempt status of a buyer and generate a resale certificate to keep in your records here.

While this guide provides you with pointers to registering your business and sales tax permit in Maryland, we strongly advise you contact local authorities or consult an attorney or a business advisor to avoid any potential mistakes during the registration process.

Contact Details

Comptroller of Maryland

Revenue Administration Center
110 Carroll Street
Annapolis, Maryland 21411-0001
For phone numbers visit here.

Department of Assessments and Taxation

301 W. Preston Street, Room 801
Baltimore, MD 21201-2395
Phone: 410-767-1184
General inquiries email: sdat.411@maryland.gov

The Maryland Department of Labor, Licensing, and Regulation (DLLR)

301 W. Preston St.
Baltimore, MD 21201-2395
Phone: (877) 634-6361

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