Media Type: Alert
The Maryland Comptroller’s office has recently expanded its efforts to enforce consumer use tax compliance by requesting that Customs authorities relay information on the declarations of residents re-entering the country after travel abroad.
Many people do not realize that every purchase of taxable goods and services, whether in person or over the internet, is subject to either sales or use tax. Sales tax applies to purchases within the State, while the use tax applies to purchases out of the State to be used within. If sales tax is paid on an item, no use tax is due. Further, if the consumer pays sales tax in another State, use tax applies only to the difference between the sales tax rate paid in the other State and the rate in the consumer’s home state.
The Maryland rate is 6 percent or, in the case of alcoholic beverages, 9 percent. Online-only vendors such as Amazon.com, which do not have a physical presence in Maryland, are not legally required to collect Maryland tax on purchased goods in which case the obligation to report and pay the use tax falls on the consumer.
Unlike other States such as Virginia, Maryland does not have a line item on its income tax return form where residents can report and pay use tax. Instead, Maryland residents are obligated to file, on a quarterly basis, a Consumer Use Tax Return for Out of State Purchases, on Form ST-118A (or ST-118B in the case of alcoholic beverages). Use tax returns are due on the 20th day of the month following each reporting quarter. The compliance level is believed to be low.
Congress is considering legislation under its authority to regulate interstate commerce that would require most internet marketers, among others, to collect use tax for all states into which they send taxable merchandise.
This note focuses on the consumer aspects of the use tax. There are numerous other sales and use tax issues that may be relevant to business operations. If you would like to meet with one of our tax attorneys to discuss how the sales and use tax affects you or your business, or if you need assistance with any other federal or state tax matter, please call us at 301-340-2020.
Tax Law at Stein Sperling
Stein Sperling’s tax law attorneys counsel clients on the intricacies of business and personal taxes in order to minimize tax liabilities. Each of our tax law attorneys holds either a Master of Laws degree in Taxation or is a Certified Public Accountant (CPA) or both. We participate in programs that allow us to stay on top of the rapidly changing world of tax laws, regulations, cases and rulings. We decode the tax talk and carefully guide our clients, helping them understand the big picture tax implications and tailoring strategies that benefit their short- and long-term objectives.
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