Free guide for contractors
Do contractors charge sales tax in Maryland?
General information, not tax advice. Tax rules change and depend on the details of each job. Confirm how they apply to your business with your accountant or the state's revenue department before relying on them.
MD Maryland
Usually no tax on the invoiceNo, for real property work. Maryland contractors pay tax on materials when buying them, and no tax is charged to the customer.
The Comptroller says a contractor's purchase of materials is taxable to the contractor and no tax is charged to the customer for real property work. Contract wording such as 'tax included', and the form of payment, do not change this.
Labor to install, erect, assemble or repair real property is not taxable, whether it is listed separately or billed in a lump sum.
Personal property is different. Separately stated labor to install personal property is not taxable, but when the installation charge is not stated separately, the entire sales price is taxable. Labor to fabricate tangible personal property is taxable either way.
Kitchen cabinets are real property in homes and businesses alike. Other counters and cabinetry installed in commercial spaces are treated as personal property.
It turns on: whether the item becomes real property or stays personal property; whether installation of personal property is stated separately; who the customer is.
Watch out for
- A contractor may buy wall-to-wall carpet tax-free on a resale certificate and must then collect tax from the customer; vinyl, tile and laminate are real property improvements (Business Tax Tip #18).
- Cleaning a commercial or industrial building is a taxable service (Md. Code, Tax-General § 11-101(m)(3)).
- Government, U.S. agency, embassy and credit union jobs do not pass an exemption to the contractor; private nonprofit charitable, educational and religious organizations and volunteer fire, ambulance or rescue companies do (COMAR 03.06.01.19D-E).
- Production machinery, farm equipment and pollution-control equipment stay personal property however they are attached (COMAR 03.06.01.19C(3)).
“The purchase of the materials is taxable to the contractor and no tax is charged to the customer.”Comptroller of Maryland, Business Tax Tip #18