What Is The Food Tax in Maryland?
Trying to understand which food, and other goods, is and is not taxed in the state of Maryland can be confusing. You may be wondering what the percentage rate is when it comes to the food (sales and use) tax, and what that tax rate covers. The rate in Maryland is currently set at 6%, but not everything falls into the taxable category.
Here’s what you should know:
Understanding the Maryland Sales and Use Tax
In Maryland, this type of tax is called the Sales and Use tax and applies to goods including food, vehicles, clothing, jewelry, art, furniture, etc.. Maryland has a higher state sales tax than 71.2% of other states.
For those who do not know, sales tax is paid to a governing body on the sale of certain goods and services. A state sales tax was first created in Maryland in 1947, and in 2019 it was decided that there would be no local sales taxes in Maryland – so only the state tax remains. Business owners are in charge of managing the taxes on their goods and services and must pass along this revenue to the state. Failure to file and pay sales and use tax correctly and timely can result in penalties and interest charges.
Sometimes it is easier to understand the sales and use tax when looking at the exceptions, and there are quite a few.
Exemptions of the Sales and Use Tax.
If you are operating a grocery or market that sells food for consumption off the property, then you will not be responsible for collecting and remitting the 6% sales and use tax. Groceries are not considered prepared food that will be consumed on the premises, and thus are nontaxable. You will see that in addition to groceries, prescription medications are also exempt.
This can get tricky, especially because more and more grocery markets and stores are pre-packaging meals for consumption. These grocery markets may have tables for the customer to buy hot food to then sit down and eat within the store. If the food is prepared for consumption on the grocer’s premises or sealed for carry out, then these foods are considered prepared foods and will be subject to a 6% sales tax.
In addition to this exemption, agricultural products are not taxed if they are bought by a farmer and are being used for an agricultural purpose. According to MD Code, Tax-General 11-201, this includes livestock, feed or bedding for livestock, seed, fertilizer, twine or wire and fuel for farm equipment. If a farmer purchases a container to transport farm products that the farmer raises, a farm vehicle, a milking machine and other equipment used when farming, then that too is exempt from the 6% sales tax.
Another exemption is the sale of food to support nationally organized veterans of the armed forces. This also includes the support of a volunteer fire department or rescue team. In both cases, the food must be served by an exempt organization who has applied to the Comptroller of Maryland to obtain an exemption certificate, and must be consumed on the property. These exempt organizations may include government agencies and non-profit organizations.
Need help understanding if your business, store or organization is exempt from the sales and use tax? Don’t wait until it’s too late. Here at Taurus CPAs, we know the importance of finding the right resources when you need them. That’s why the founders of Taurus CPAs have aligned with a network of highly qualified professionals to ensure your success. Members of Team Taurus are experts in their field and are ready and willing to assist you in any way. Contact us today!