Maryland Sales Tax Guide
Chapter 8: Understanding Maryland sales tax rules for shipping & handling
Maryland’s 6 percent sales tax applies to all product purchases in the state but alcohol, which is charged at 9 percent. When goods are purchased out of state, Maryland enacts a use tax when the product being purchased will be used in Maryland.
But like many states, Maryland has special considerations on sales tax for shipping, handling, and delivery charges. Some of these charges become tax-exempt when they are stated separately on an invoice, but it’s important to know exactly what is and isn’t taxable before making a sale in Maryland.Is Shipping Taxable in Maryland?
When a sale is made in Maryland by a business that is either located or has nexus in that state, shipping and delivery is tax-exempt. But this exemption only applies if the shipping charges are stated separately on the invoice. If the charges are added to the sales price, sales tax must be paid on the entire amount.
In Maryland, this exemption extends to other charges related to getting the product to customers, as well. Services like installation, professional services, and delivery services are exempt from sales tax as long as they are stated separately. The separate itemization must be made known to the customer at the time of the sale by printing it on the customer’s invoice or receipt.Exceptions
While many businesses combine shipping and handling as one charge, in Maryland they must be separated. Handling is considered part of the purchase price in the state and must be combined with the purchase amount. Businesses must separate handling from the actual cost to deliver the items to the customer and include it with the portion on which sales tax is being paid.
There is an exception when it comes to taxable delivery charges, as well. In order to qualify as tax exempt, deliveries must be made directly to the customer from the business’s warehouse or facilities. If a business ships the items to a separate party for delivery to customers, that business will be required to include shipping charges with the sales price and pay tax on the full amount.The Importance of Separating Shipping Costs
Michelle Byrnie-Parker, deputy director of communications for the Maryland Comptroller’s office, emphasizes the importance of separating shipping costs: “Separately stated shipping or delivery charges are not included in determining the sale price of otherwise eligible items,” she says. “However, a combined shipping and handling charge is legally considered as part of the sales price of an item, even if the combined charge is separately stated from the price of the item.”
The final word: For Maryland businesses, shipping and delivery are tax-free as long as the cost is stated separately on an invoice. Businesses must make sure items are shipped directly to customers, though, and customers must be made aware of this tax-free status by having shipping cost itemized on the receipt after tax has already been calculated on the purchase price.