Maryland’s marketplace facilitator sales tax law, explained
by October 31, 2023
Please note: This blog was originally published in 2019. It’s since been updated for accuracy and comprehensiveness.
The state of Maryland requires marketplaces to collect sales tax on behalf of sellers on online marketplaces like Amazon and Walmart.
This means that if you sell on a platform like Amazon, then Amazon will collect sales tax from your Maryland buyers on your behalf, and remit it to the state.
But as usual, there are always a few wrinkles here when it comes to e-commerce sales tax.
This post will explain what online sellers need to know about the Maryland marketplace facilitator law, and answer your frequently asked questions.
Overview of the Maryland marketplace facilitator law
Maryland’s marketplace facilitator law states that marketplace facilitators in Maryland collect sales tax on behalf of third-party sellers in the previous or current calendar year on all sales made through the marketplace for delivery into Maryland.
Quick facts about the Maryland marketplace facilitator law
- Effective date: October 1, 2019
- Threshold: This law requires that marketplace facilitators in Maryland collect sales tax on behalf of third-party sellers in the previous or current calendar year on all sales made through the marketplace for delivery into Maryland. It’s worth mentioning that a marketplace facilitator and seller may ask for a waiver of this requirement if:
- The marketplace seller is a publicly traded communications company;
- The marketplace facilitator and marketplace seller have an agreement that the seller will collect and remit applicable taxes; and
- The marketplace seller provides the facilitator with evidence that the seller is licensed to engage in the business of an out-of-state vendor in Maryland.
- State law information: Read the full text of the Maryland Marketplace Facilitator Law
- Marketplaces that have adopted this law:
Frequently asked questions about marketplace facilitator laws
What exactly is a marketplace facilitator in Maryland?
Maryland law defines marketplace facilitators as an entity or individual that facilitates a retail sale by:
- listing or advertising for sale in a marketplace tangible personal property, and
- collects payment from a buyer and transmits the payment to a marketplace seller
Online sales platforms like Amazon and eBay are considered marketplace facilitators under Maryland law.
Does this mean I can stop collecting Maryland sales tax?
If a marketplace facilitator collects the applicable sales and use tax, the seller is not required to collect sales tax on a facilitated sale. The sales and use tax is due at the time of sale. The buyer is required to pay the sales tax directly to the marketplace facilitator and the marketplace facilitator will remit tax collected directly to the State.
Marketplace facilitator laws only cover marketplaces. The state still requires that merchants collect sales tax from buyers via sales channels where the marketplace facilitator laws do not apply.
Does this mean I can cancel my Maryland sales tax permit?
It depends.
You do not have to register if you are a seller and all your sales are through a marketplace facilitator. However, if you are a marketplace seller that also makes direct sales, then you are required to register as an out-of- state seller.
But first, a word of caution. We recommend checking directly with the state or a sales tax expert before cancelling your sales tax registration. This is because your business is now on the state of Maryland’s books and potentially on their radar should they decide that you still have sales tax obligations in the state of Maryland.
Final note: It’s important to assess your business before making a decision about cancelling sales tax permits. Are you in a growth stage? Do you plan to expand and think you may have Maryland sales tax collection requirements in the future? Then you may want to hang on to your Maryland sales tax permit rather than cancelling it and going through the administrative hassle of registering again in the future. This business decision is up to you.
Do I still need to file a Maryland sales tax return?
If you are registered to collect sales tax in Maryland (i.e. you have an active Maryland sales tax permit) then the state still requires that you file sales tax returns.
If you only make sales via marketplaces, and all of your marketplaces collect sales tax from buyers on your behalf, then you may only be required to file a “zero return.” (This is a return showing that you do not have any sales tax to remit to the state.)
If you no longer have any sales tax to remit to the state of Maryland, we recommend checking directly with the state to determine if you can cancel your sales tax registration.
Be cautious here. If you are registered for a sales tax permit and do not file, the state can assess penalties even though you don’t have any sales tax to remit! We have, unfortunately, talked to too many sellers who have found this out the hard way when a tax penalty bill arrives.
What do I do with any Maryland sales tax I have already collected?
If you have already collected Maryland sales tax from buyers, it is vital that you remit that amount to the state. The only way to get in serious criminal trouble in sales tax is to collect sales tax from buyers on the state’s behalf but keep it in your own pocket.
Does TaxJar handle this for me?
Yes.
TaxJar AutoFile handles Maryland sales tax automatically
TaxJar AutoFile automatically compiles your sales tax data the way the state of Maryland wants it filed. For example, many states, Maryland included, want sellers to break down their sales tax collected interstate (sales originating in Maryland sent to another state) and intrastate (sales made from Maryland to Maryland.)
If a marketplace has collected sales tax on your behalf, TaxJar reports that directly to the state so that the state is aware you have met your sales tax obligations.
If you currently AutoFile your Maryland sales tax returns, you don’t need to do a thing. It’s handled!
TaxJar reports give you all the info you need to file manually
If you prefer to file manually, your TaxJar Reports also reflect what the Comptroller of Maryland wants to see on your tax return.
Also don’t worry that you will double pay. TaxJar accounts for sales tax collected on your behalf, and only shows you the amount you owe to the state out of your pocket.
Further reading on Maryland sales tax and marketplace facilitator laws:
- TaxJar’s Marketplace Facilitator FAQ
- State by State: Marketplace Facilitator Laws Explained
- Maryland Sales Tax Guide for Businesses
