Pay Your Maryland Small Business Taxes

There are a lot of great things about running a Mayland small business, but keeping current with your taxes at the federal, state, and local levels isn’t one of them. However, all Maryland small businesses must pay taxes in some form or another, and paying your taxes on time is necessary to staying legally compliant with the state. If this seems overwhelming, we’re here to help. Read on to learn more about the kinds of state taxes you might face as a Maryland business owner, when and how to pay them, and which of our products and services can make your life easier when tax time rolls around. 

Running a business entails much more than just buying and selling, and taxes aren’t the only paperwork you have to worry about filing on time. Whether it’s annual reports, amendments, or other business documentation, our Worry-Free Compliance Service can help you keep track of all the important administrative things you need to do. 

If you’re looking for information about federal taxes, head over to our page on federal taxes for small businesses to learn more.

Step 1: Establish your Maryland business’s corporate income tax obligations

Maryland small business taxes are different for each entity structure. There are separate income tax rates and forms for sole proprietorships, corporations, and pass-through entities such as limited liability companies, S corporations, and partnerships. 

Maryland Corporate Income Tax

The Maryland small business tax rate for corporate taxes is 8.25 percent on Maryland’s taxable income. This is a modified income rate and the equivalent of the corporation’s federal tax income adjusted by state modifications. Form 500 is required for Maryland corporate taxes. 

Pass-Through Entity Tax

Taxes for a pass-through entity aren’t paid by the business. Taxes “pass-through” to the owner or member, or shareholder. 

• Partnerships
• Limited liability companies (LLCs)
• S corporations
• Business trusts

Each member, partner, or shareholder is responsible for filing their own Maryland income tax return. The company files a Form 510, but no payment is due for this form unless the company has nonresident members. 

Sole Proprietorship Tax

Many states lump sole proprietorships with pass-through entities. Maryland treats sole proprietors as a regular individual filing income taxes using Form 502. It’s important to note that sole proprietors generally don’t have taxes withheld. To avoid a big lump payment to the state, consider filing quarterly taxes. 

Maryland Small Business Tax Rates

Tax rates are subject to change from year to year, as are the forms your business is required to submit. Besides the official website, the U.S. Small Business Administration (SBA) is also a great resource. Corporate quarterly taxes are due to the state Comptroller by the 15th day of the month they’re due. 

Step 2: Determine your Maryland business’s employment taxes

Maryland employers withhold income taxes from wages for most employees making taxable income. There are some exceptions. Employers are expected to keep detailed records of withholdings. Employee withholdings are not an additional tax, but a system for collection. 

The Maryland Comptroller’s website has a withholding guide to help you determine the amount that needs to be withheld and when payments are due. New businesses generally pay quarterly. 

Step 3: Establish your Maryland business’s additional state tax obligations

Income and withholding taxes are just a few of the Maryland small business taxes your company may be responsible for. The nature of your business impacts what additional taxes you pay in Maryland. 

Sales Tax

A six percent sales tax is collected on all goods sold in the state of Maryland, whether they are sold in-person, online, or over the phone. This is also true for goods purchased outside of Maryland and shipped in. Grocery store food and prescription medications are generally not subject to sales tax. Maryland requires applicable sellers to remit sales tax payments either monthly, quarterly, semiannually, or annually. These returns are always due on the 20th of the month following the reporting period.

Use Tax

When sales tax isn’t paid at the time of purchase, a six percent use tax is applied. This is generally a tax that’s paid by the consumer and not the business. File the payment along with the Consumer Tax Return Form quarterly, similar to sales tax. 

Franchise Tax

Maryland’s franchise tax is applied to public service companies such as gas, electric, and telephone companies. It’s equivalent to two percent of the business’s gross receipts. Payment is due to the Maryland Department of Assessments and Taxation, Franchise Tax Unit by March 15th of each year. 

Unemployment Tax

Unemployment Insurance (UI) taxes have been more complicated since the onset of the Covid 19 pandemic. Currently, the Maryland small business tax rate for contributory employers is between 2.2 percent and 13.5 percent. New employers start at a rate of 2.3 percent which is subject to change the longer they are in business. Maryland is currently offering payment plans to assist businesses. 

Excise Tax

Maryland collects general excise taxes on certain products including vehicle fuel, tobacco, alcohol, and cell phone plans. These all have their own tax rates and filing procedures. 

Step 4: Prepare to file and pay your Maryland business taxes

Submit Maryland small business taxes to the State Comptroller. The state has a convenient online business tax filing system called iFile. You’ll need to register an account with the system before you begin the filing process. You can also submit forms via mail to the Comptroller of Maryland’s Revenue Administration Division.

Make sure to include your business name, address, and your nine-digit federal employer identification number (EIN), and eight-digit Maryland Central Registration (CR) number. 

You’ll need all documents related to finances including accounting records, legal documents, receipts, and more, which makes tracking your expenses and income essential. Luckily, our ZenBusiness Money App can help you track all of your transactions and provide a record of invoices all in one place. 

Not sure how to stay compliant? Learn more about legal compliance for small business owners.

Do I need an accountant?

Most Maryland small business taxes will require the assistance of a professional accountant to properly execute. There are a lot of moving parts to business tax preparation. Failing to file your Maryland small business taxes may result in harsh penalties and fees that will continue to accrue until paid. If you’re an officer owning a minimum of 20 percent of your corporation, you may be held personally liable for the unpaid tax obligations and corresponding penalties. The state may also impose liens and levies to receive payment. The state also has the right to revoke the corporate charter. 

Not all tax preparation professionals are the same. Find out more about the type of tax professional best suited for your business needs, check out this IRS resource guide to tax preparer credentials and qualifications. 

How we can help 

Make it easier on yourself and consider using the ZenBusinesss Money App for tracking business finances. The app allows your to easily send custom invoices, accept credit card and bank transfer payments, and manage your clients from an easy-to-use dashboard.

If your business is still in the formation phase, our Maryland LLC Formation Services or Corporation Formation Services can help you get started.

No matter how big or small your business is, we have the tools you need to keep your business running smoothly.