Sales and use tax compliance is one of the most common sources of audit risk for Maryland businesses. Unfortunately, many small business owners don’t realize they’ve made a mistake until the state sends a notice. From missing use tax to improper exemption certificates, even minor oversights can trigger a costly audit.
At Saltzman Law, we provide business tax appeals services in Maryland for companies facing audits, assessments, or disputes with the Comptroller. Whether you need help responding to a notice or want to prevent future issues, understanding the basics of sales and use tax is a crucial first step.
What’s the Difference between Sales Tax vs. Use Tax?
Maryland’s 6% sales tax applies to most tangible personal property and certain services. If your business sells taxable items, you are responsible for collecting the tax at the point of sale and remitting it to the state.
Use tax, on the other hand, applies when your business buys taxable goods without paying Maryland sales tax—for example, from an out-of-state vendor. In those cases, the burden shifts to you to calculate and pay use tax directly to the state.
Common use tax triggers include:
- Online purchases without sales tax
- Trade show giveaways purchased out-of-state
- Business equipment delivered from a non-Maryland supplier
What Triggers a Maryland Sales & Use Tax Audit?
Sales and use tax audits aren’t random. The Maryland Comptroller typically initiates audits based on patterns or red flags, such as:
Late or Inconsistent Tax Filings
Repeated late returns or inconsistent filing amounts can lead to scrutiny. Even small discrepancies in reporting can flag your business for review.
High or Unusual Exemption Claims
If your business regularly claims resale or exempt sales without solid documentation, the state may question the validity of those claims.
No Use Tax Reported on Out-of-State Purchases
Businesses that never report use tax—especially those with significant vendor activity outside Maryland—may raise compliance concerns.
Industry Benchmarking or Whistleblower Tips
The state compares your filings to others in your industry. If your tax payments fall far outside the norm, or someone reports a concern, that could also prompt an audit.
What Happens During a Sales & Use Tax Audit?
A Maryland tax audit generally begins with a notice and a list of records the state wants to review. These may include:
- Sales receipts and invoices
- Purchase records
- Exemption certificates
- Use tax filings
- General ledger reports
Audits can span multiple years and may include on-site reviews. If errors are found, the Comptroller can issue an assessment with added penalties and interest.
Saltzman Law helps business owners respond to audits by organizing records, identifying compliance issues, and communicating directly with state auditors to clarify or contest findings.
How Saltzman Law Helps Resolve Sales & Use Tax Disputes
Our business tax appeals services in Maryland are designed to protect your business from unfair assessments and help you stay compliant. We assist with:
- Preparing for or responding to audit inquiries
- Reviewing state findings and identifying legal defenses
- Filing formal tax appeals
- Negotiating settlements or penalty abatements
