What Is the Maryland Food Tax?
Everyone knows that taxes are what helps state and federal governments raise money so they can provide a wide variety of services – from making sure roads are properly paved to funding programs like unemployment and welfare.
One of the most common taxes is the sales tax, which is defined by the State of Maryland as:
“… a state tax on the purchase of most tangible personal property and on some services in Maryland. Tangible personal property is property that can be physically touched, manufactured, and moved. In Maryland, it also includes electricity, natural gas, and the right to stay/rent a room (such as a hotel room).”
The key word to understanding this definition is “tangible”, and in this case it can mean agricultural products sold by farmers. When it concerns food sales, a tangible item would be anything purchased from a substantial grocery or market business, like your local grocery store. This is why you won’t have to pay a Maryland food tax on a box of crackers.
However, if a grocery store that falls under this category sells prepared foods that can be consumed on the premises, or carried out, then you will most likely pay a 6% sales tax.
This type of food could be something you purchase from a salad bar, or sandwiches and other items that are cooked on the premises. Other examples would include ice cream, frozen yogurt, and frozen desserts.
Unlike grocery stores, restaurants who make food items that are packaged to be eaten when a consumer leaves its premises do not have to be taxed. However, if the food is consumed on the premises, a Maryland food tax can be included on the final bill.
Other businesses that must charge a tax on food include caterers that are also part of a substantial grocery or market business. For instance, if a grocery store chain also sells party platters, a tax must be paid on those items.
You will also see that food taxes are charged at fairs, shows, and other events. Even if the event is free, the tax is still applied. Nonprofit groups who sell food to raise money are exempt from this tax in order to help them achieve their fundraising goals.
Figuring out Food Taxes
If you’re an owner or operator of a grocery store or restaurant, you’re responsible for making sure that items you sell are properly taxed and accounted for in your business records. Of course, you will also need to keep track of other financial records like paying for services, payroll, and property taxes.
As an owner or operator of a business in the food industry, you have a lot of chores on your plate, and it’s more than making sure that what you offer the public is the highest quality. You also need to take into account responsibilities like filing taxes properly, planning for growth and expansion, and keeping accurate records.
Taurus CPAs have been working with businesses of every size since we opened our doors. We’re familiar with Maryland federal tax laws, and how they can affect your business operations.
Our staff of professionals stays up to date on the latest developments and changes to the tax codes, so you can pay close attention to your business, and let us take care of the rest.
Contact us today.