Veterans’ Organizations
Purchases made by veterans’ organizations and their auxiliary units are exempt from Maryland sales tax if the purchases are made for the organization's exempt purposes.
The exemption became effective on July 1, 2006. Exemption certificates issued to qualifying veterans’ organizations will expire on September 30, 2027. The new exemption certificate is a white card with green printing, bearing the organization's eight-digit exemption number. Certificates are renewed every five (5) years.
The organizations or their auxiliaries or units must possess a 501(c)(19) letter of determination from IRS as evidence of qualification for the exemption. For more information on obtaining a letter of determination from IRS, visit the IRS Web site.
To apply for an exemption certificate visit https://mdtaxconnect.gov/rptp/portal/home/md-sutec/ and complete the online application.
Submit the completed application with a copy of the 501(c)(19) letter of determination, articles of incorporation and bylaws. The application may also be obtained by calling Taxpayer Services Division at 410-260-7980, or toll-free 1-800-638-2937 from elsewhere in Maryland, Monday - Friday, 8:30 a.m. - 4:30 p.m. EDT.
Tax Exempt Sales for Contractors
A contractor may use an organization's exemption certificate to purchase materials that will be used to construct, improve, alter or repair the real property of private, nonprofit charitable, educational, and religious organizations; volunteer fire companies and rescue squads; and nonprofit cemeteries. The materials must be incorporated into the realty to qualify for the exemption. Sales of materials used to improve the realty of government entities, credit unions and veterans’ organizations are taxable, and their certificates may not be used by contractors.
A contractor may use an exemption certificate from a nonprofit organization if the first two digits of its exemption number are:
- 29 (religious organizations)
- 31 (charitable and educational organizations), or
- 33 (volunteer fire departments, rescue squads and ambulance companies).
Purchases made by using the following charge cards are subject to the Maryland sales and use tax since they are billed directly to the individual and are not treated as direct sales to the federal government:
- 30 (government agencies), or
- 32 (credit unions), or
- 34 (veterans’ organizations).
Tax Exempt Sales by Nonprofit Organizations
The following sales made by nonprofit organizations are exempt from the Maryland sales and use tax:
- Sales by churches or religious organizations for their general purposes.
- Sales of food by schools other than post-secondary institutions.
- Sales of food by a nonprofit organization if there are no facilities for food consumption on the premises and the food is not sold within an enclosure for which a charge is made for admission.
- Sales of food served by a volunteer fire, ambulance or rescue company or an auxiliary if the proceeds are used to support the organization.
- Sales of magazine subscriptions in a fundraising activity by an elementary or secondary school in the state if the net proceeds are used solely for the educational benefit of the school or its students.
- Sales made in hospital thrift shops operated entirely by volunteers selling only donated articles for the benefit of the hospital.
- Sales made by an auctioneer for a Bonafide church, religious organization or other non-profit organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code if the proceeds are used for exempt purposes. Unless the organization is a church or religious organization, only the portion of the price that qualifies for a deduction as a charitable organization under IRS guidelines is exempt from the sales and use tax.
- Sales by out-of-state nonprofit organizations that are exempt from income tax under Section 501(c)(3) or Section 501(c)(19) of the Internal Revenue Code that have a location in Maryland or are in an adjacent jurisdiction and satisfy one of the following conditions:
The organization provides its services in Maryland on a routine and regular basis;
The adjacent jurisdiction does not impose a sales or use tax on a sale to a nonprofit
organization made to carry on its work; or,
The adjacent jurisdiction has a reciprocal exemption from sales and use tax for
sales to nonprofits located in adjacent jurisdictions like Maryland's exemption.
Only churches, religious organizations and government agencies may use an exemption certificate to purchase items for resale without paying sales and use tax. All other organizations must issue a resale certificate, with their Maryland sales and use tax license number, to purchase items tax-free for resale.
Any organization making ordinarily taxable sales of tangible personal property, including meals, must obtain a sales and use tax license and collect and remit the tax, even though the organization has an exemption for items it purchases. The organization must collect tax on sales to anyone, including members, students and beneficiaries, even if the item has been donated or sold at or below cost.
Tax should not be collected on sales of goods to PTAs and similar groups associated with non-public schools if the property will be donated to an exempt school. Local PTAs may use their school's exemption certificate when claiming exemptions. Tax should be collected, however, on sales of items to PTAs that they will use in their operations, but which are not donated to schools.
NOTE: The Maryland sales and use tax exemption certificate applies only to the Maryland sales and use tax. A nonprofit organization that is exempt from income tax under Section 501(c)(3) or Section 501(c)(19) of the Internal Revenue Code and holds a valid Maryland sales and use tax exemption certificate, is still liable for other state and local taxes in Maryland, such as local hotel taxes.
Tax Exempt Sales to Government Employees
Government employees may use the Maryland sales and use tax exemption certificate to make purchases of goods for the government unit. However, the sales and use tax law does not expressly exempt sales to a government employee who, for example, rents a hotel room or purchases a meal and pays for it with cash, personal check or personal credit card. Those employees are required to pay the Maryland sales and use tax to the vendor.
The tax is due on those transactions even though the employee may have documentation provided by the government agency that the purchaser is a government employee or may be reimbursed by the government for those expenses.
Federal government charge card purchases
Federal government purchases made by using the following charge cards administered by the U.S. General Services Administration's GSA SmartPay charge cards are exempt from the Maryland sales and use tax since they are billed directly to the federal government:
- Purchase MasterCard cards with the first four digits of 5565 or 5568.
- Purchase VISA cards with the first four digits of 4614 or 4716.
- Fleet VISA cards with the first four digits of 4486.
- Fleet MasterCard cards with the first four digits of 5563 or 5568.
- Fleet WEX cards with the first four digits of 6900 or 7071.
- Fleet Voyager cards with the first four digits of 7088.
- Travel MasterCard cards with the first four digits of 5565 or 5568, and with a sixth digit of 0, 6, 7, 8 or 9.
- Travel VISA cards with the first four digits of 4486, 4614, or 4615, and with a sixth digit of 0, 6, 7, 8 or 9.
Purchases made by using the following charge cards are subject to the Maryland sales and use tax since they are billed directly to the individual and are not treated as direct sales to the federal government:
- Travel MasterCard cards with the first four digits of 5565 or 5568, and a sixth digit of 1, 2, 3 or 4.
- Travel VISA cards with the first four digits of 4486 or 4614, and a sixth digit of 1,2, 3 or 4.