On August 29, 2018, the Maryland General Assembly's Joint Committee on Administrative, Executive, and Legislative Review approved emergency regulations to support Maryland's implementation of South Dakota v. Wayfair decision. This Supreme court decision can require retailers to collect sales taxes in states where the retailers do not have a physical presence. This decision overruled Quill V. North Dakota. Effective October 1, 2018, out-of-state vendors must keep records to determine whether they will be required to remit Maryland sales tax on retail sales for delivery into Maryland.
Maryland Sales and Use Tax Nexus for Out-of-State Vendors
An out-of-state vendor without a physical presence in Maryland is required to register with the Comptroller of Maryland and to collect and remit Maryland sales tax on retail sales of tangible personal property or taxable services for delivery into Maryland when, during the previous calendar year or the current calendar year, the vendor meets the following criteria:
- Gross revenue from the sale of tangible personal property or taxable services delivered into Maryland exceeds $100,000; or
- Sales of tangible personal property or taxable services for delivery into Maryland in 200 or more separate transactions.
Therefore, beginning October 1, 2018, out-of-state vendors should begin to track gross revenues and sales delivered into Maryland to determine if either of the above criteria is met. This tracking requirement does not apply to sales delivered into Maryland prior to October 1, 2018. For the period of October 1, 2018 through December 31, 2018, an out-of state vendor meeting either of the criteria during that period is required to register with the Comptroller of Maryland and to remit Maryland sales tax on sales delivered into Maryland as soon as one of the criteria is met. Out-of-state vendors should file according to a monthly filing schedule, but the filing schedule may be adjusted by the Comptroller's office depending on the amount of taxable sales.
Registration with the Comptroller by out-of-state vendors is required by the first day of the following month in which either of the criteria was met. However, out-of-state vendors may choose to voluntarily register and collect Maryland sales tax prior to the effective date.
For the calendar year of 2019 and subsequent years, out-of-state vendors not previously required to register with the Comptroller of Maryland are required to track all sales delivered into Maryland. When either of the criteria is met, at any time during the calendar year, an out of-state vendor must register with the Comptroller by the first day on the following month and immediately begin collecting Maryland's sales tax on subsequent sales to its customers. Collecting of Maryland sales tax is required where the vendor has met either of the criteria in the previous calendar year or the current calendar year.
Out-of-state vendors required to register with the Comptroller of Maryland and to collect and remit Maryland sales tax under the revised regulation should continue to track sales delivered into Maryland. Out-of-state vendors not meeting the criteria for the previous or current calendar year will no longer have an economic nexus with Maryland and may discontinue collecting Maryland sales tax. Those vendors that discontinue collecting Maryland sales tax should maintain sales and related records that demonstrate that the criteria were not met.
Maryland Sales and Use Tax Liability for Out-of-State Vendors
Out-of-state vendors that have nexus with Maryland only because they meet the gross revenues or sales criteria will not be liable for any sales and use tax, interest, or penalties for sales occurring on or before September 30, 2018. However, out-of-state vendors will be liable for tax, interest, or penalties if they had a physical presence in Maryland or were required to collect and/or remit Maryland sales tax under other Maryland laws or regulations prior to October 1, 2018. Out-of-state vendors will be liable for tax, interest, or penalties if they meet the gross revenue or sales criteria discussed herein and fail to collect and/or remit the sales tax to the Comptroller. Out-of-state vendors are subject to audit like any other Maryland business.
Reliable Tax Attorney is a Maryland Tax Attorney representing clients nationwide before the IRS and various tax agencies. If you need further assistance with this matter or other related matter, please contact our office.
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