Audience: Businesses

Updated November 25, 2019

Maryland Law and Regulation on Out of State Vendors

Under Maryland law, a person who engages in the business of an out-of-state vendor must register with the Maryland Comptroller, collect and pay sales and use tax, and file Maryland sales and use tax returns. A person engages in the business of an out-of-state vendor if the person:

1. Permanently or temporarily maintains, occupies, or uses any office, sales or sample room, or distribution, storage, warehouse, or other place for the sale of tangible personal property or a taxable service directly or indirectly through an agent or subsidiary;
2. has an agent, canvasser, representative, salesman, or solicitor operating in the state for the purpose of delivering, selling, or taking orders for tangible personal property or a taxable service;
3. Enters the state on a regular basis to provide service or repair for tangible personal property;
4. Regularly uses the person's vehicles to sell or deliver tangible personal property or a taxable service for use in the State; or
5. Sells tangible personal property or taxable services for delivery in the State, if, during the previous calendar year or the current calendar year, the person satisfies either of the following criteria:
   1. The person's gross revenue from the sale of tangible personal property or taxable services delivered in the State exceeds $100,000; or
   2. The person sold tangible personal property or taxable services for delivery into the State in 200 or more separate transactions.

See Md. Code Ann., Tax-Gen. §§ 11-701(b)(2)(i)-(b)(2)(iii) and COMAR 03.06.01.33(B)(4)-(5).

Engaging in the Business of an Out-of-State Vendor

The Comptroller's Office interprets Section 11-701(b) as broadly as is permitted under the United States Constitution.

The Comptroller considers the phrase "on a regular basis" as used in § 11-701(b)(2)(ii) to be met if a vendor, such as a furniture or appliance dealer, provides such service or repair as a customary, usual or normal course of business.

Section 11-701(b)(2)(ii) does not define the word "service" in the phrase "provide service or repair for tangible personal property." The Comptroller's Office, relying on a dictionary definition of "service," interprets the word to mean "installation, maintenance, or repairs provided or guaranteed by a dealer or manufacturer." See, for example, the American Heritage Dictionary, Second College Edition (1985).

A dealer or manufacturer that regularly installs, or who performs maintenance for, tangible personal property such as furniture or appliances is engaged in the business of an out-of-state vendor within the meaning of Section 11-701(b)(2)(iii).

No minimum number of service or repair visits is required to meet the definition. If it is the vendor's policy to provide service or repair for tangible personal property, and the vendor in fact provides such services or repairs during the audit period, these services or repairs will be regarded as regular. On the other hand, any services or repairs that are provided on a discretionary and infrequent basis will not be regarded as regular.

The Comptroller's Office will examine all relevant information in making a determination about whether a person engages in the business of an out-of-state vendor under § 11-701(b)(1-4). This information includes advertising materials, promotional literature, websites, representations made to prospective customers before sale, whether the vendor routinely employs service or repair personnel or regularly contracts for such services or repairs, and the vendor's description of its business operations as contained in business documents and submissions to government agencies.

Closing a Sales and Use Tax Account

If you have determined that you no longer have nexus with the State of Maryland, are not required to file Maryland sales and use tax returns, and do not need to retain your account to claim a resale exemption, you can close your Maryland sales and use tax account by filing the Maryland Sales and Use Tax Final Return Form 202FR.