# COMAR Title 03 — Comptroller of the Treasury

## Subtitle 06 — Sales and Use Tax

### Chapter 01 — Sales and Use Tax

**Authority:** Tax-General Article, §§2-102, 2-103, 11-102, 11-104, 11-105, 11-206, 11-245, 11-502, and 11-504, Annotated Code of Maryland

**Administrative History:** Effective date:

**Administrative History:** Regulation .01 effective June 2, 1961

**Administrative History:** Regulation .01 repealed effective January 1, 1990 (16:25 Md. R. 2709)

**Administrative History:** Regulation .02 effective August 1, 1947; repealed and new Regulation .02 adopted effective February 15, 1982 (9:3 Md. R. 220)

**Administrative History:** Regulation .02A and C amended effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .03 effective February 28, 1959; amended effective August 17, 1977 (4:17 Md. R. 1292); January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .04 effective July 27, 1965; repealed effective June 2, 1986 (13:11 Md. R. 1272)

**Administrative History:** Regulation .04 adopted effective June 2, 1986 (13:11 Md. R. 1272)

**Administrative History:** Regulation .04A—C, F amended effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .05 effective April 23, 1965; amended effective January 12, 1979 (6:1 Md. R. 16)

**Administrative History:** Regulations .06, .07 effective August 1, 1947; repealed effective February 15, 1982 (9:3 Md. R. 220)

**Administrative History:** Regulation .08 repealed effective July 21, 1976 (3:15 Md. R. 785)

**Administrative History:** Regulation .09 effective June 17, 1963; amended effective August 25, 1978 (5:17 Md. R. 1325); January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .09A and B amended effective August 22, 1980 (7:17 Md. R. 1668); August 30, 1982 (9:17 Md. R. 1704)

**Administrative History:** Regulation .09C amended effective January 1, 1990 (16:25 Md. R. 2708)

**Administrative History:** Regulation .09F adopted effective August 22, 1980 (7:17 Md. R. 1668)

**Administrative History:** Regulation .10 effective June 1, 1961

**Administrative History:** Regulation .10 amended effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .11 effective February 28, 1959; amended effective August 17, 1977 (4:17 Md. R. 1292); January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .12 effective December 14, 1959; amended effective August 17, 1977 (4:17 Md. R. 1292); August 24, 1979 (6:17 Md. R. 1391)

**Administrative History:** Regulation .12 repealed effective January 1, 1990 (16:25 Md. R. 2709)

**Administrative History:** Regulation .13 effective August 19, 1965

**Administrative History:** Regulation .13 repealed effective January 1, 1990 (16:25 Md. R. 2709)

**Administrative History:** Regulation .14 effective April 14, 1971; repealed effective April 4, 1980 (7:7 Md. R. 706)

**Administrative History:** Regulation .14 adopted effective April 4, 1980 (7:7 Md. R. 706)

**Administrative History:** Regulation .14 amended effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .14B amended effective August 22, 1980 (7:17 Md. R. 1668)

**Administrative History:** Regulation .14C amended effective August 22, 1980 (7:17 Md. R. 1668); January 1, 1990 (16:25 Md. R. 2708)

**Administrative History:** Regulations .15—.16 effective August 1, 1947; repealed effective April 4, 1980 (7:7 Md. R. 706)

**Administrative History:** Regulation .15 adopted effective July 13, 1986 (13:14 Md. R. 1631)

**Administrative History:** Regulation .15 amended effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .15 repealed effective January 1, 1990 (16:25 Md. R. 2709)

**Administrative History:** Regulation .17 effective August 1, 1947; repealed effective February 15, 1982 (9:3 Md. R. 220)

**Administrative History:** Regulation .18 repealed effective July 21, 1976 (3:15 Md. R. 785)

**Administrative History:** Regulation .19 effective August 28, 1973; amended effective July 28, 1978 (5:15 Md. R. 1185); August 10, 1979 (6:16 Md. R. 1329); January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .20 effective August 28, 1973; repealed effective July 28, 1978 (5:15 Md. R. 1185)

**Administrative History:** Regulation .21 effective December 22, 1971; repealed effective April 4, 1980 (7:7 Md. R. 706)

**Administrative History:** Regulation .22 repealed effective July 21, 1976 (3:15 Md. R. 785)

**Administrative History:** Regulation .23 effective November 12, 1975 (2:26 Md. R. 1559)

**Administrative History:** Regulation .24 effective November 10, 1976 (3:23 Md. R. 1301); amended effective August 25, 1978 (5:17 Md. R. 1325); August 10, 1979 (6:16 Md. R. 1329); January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .24A, B amended effective September 28, 1981 (8:19 Md. R. 1563)

**Administrative History:** Regulation .24E amended effective August 22, 1980 (7:17 Md. R. 1668)

**Administrative History:** Regulation .24F adopted effective August 22, 1980 (7:17 Md. R. 1668)

**Administrative History:** Regulation .25 repealed effective July 21, 1976 (3:15 Md. R. 785)

**Administrative History:** Regulation .26 effective August 1, 1947; repealed effective July 6, 1977 (4:14 Md. R. 1081)

**Administrative History:** Regulation .27 effective August 1, 1947; repealed effective July 14, 1978 (5:14 Md. R. 1135)

**Administrative History:** Regulation .28 effective August 1, 1947

**Administrative History:** Regulation .29 effective May 14, 1973; repealed effective July 28, 1978 (5:15 Md. R. 1185)

**Administrative History:** Regulation .30 effective August 28, 1973; amended effective July 28, 1978 (5:15 Md. R. 1185); January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulations .31—.34 effective August 1, 1947; repealed effective July 28, 1978 (5:15 Md. R. 1185)

**Administrative History:** Regulation .35 effective August 1, 1947

**Administrative History:** Regulation .35 repealed effective January 1, 1989 (15:26 Md. R. 2980)

**Administrative History:** Regulation .36 effective August 1, 1947; repealed effective July 28, 1978 (5:15 Md. R. 1185)

**Administrative History:** Regulation .37 effective December 24, 1954; repealed February 15, 1982 (9:3 Md. R. 220)

**Administrative History:** Regulation .38 effective August 1, 1947; repealed February 15, 1982 (9:3 Md. R. 220)

**Administrative History:** Regulation .39 effective July 6, 1970

**Administrative History:** Regulation .39 amended effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .39-1 effective September 29, 1976 (3:20 Md. R. 1143); amended effective August 17, 1977 (4:17 Md. R. 1292); October 5, 1987 (14:20 Md. R. 2140)

**Administrative History:** Regulation .40 effective June 17, 1963

**Administrative History:** Regulation .41 effective August 1, 1947

**Administrative History:** Regulation .41 repealed effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .42 effective June 17, 1963

**Administrative History:** Regulation .43 effective August 1, 1947

**Administrative History:** Regulation .44 effective June 11, 1969

**Administrative History:** Regulations .45, .46 effective June 2, 1961; amended as an emergency provision effective June 1, 1977 (4:11 Md. R. 864); adopted permanently effective August 31, 1977 (4:18 Md. R. 1392)

**Administrative History:** Regulation .45 repealed effective February 15, 1982 (9:3 Md. R. 220)

**Administrative History:** Regulation .46 repealed effective August 22, 1980 (7:17 Md. R. 1668)

**Administrative History:** Regulation .47 effective August 1, 1947; repealed effective July 6, 1977 (4:14 Md. R. 1081)

**Administrative History:** Regulation .48 effective August 28, 1973; amended effective August 24, 1979 (6:17 Md. R. 1391); repealed effective February 15, 1982 (9:3 Md. R. 220)

**Administrative History:** Regulation .49 effective May 12, 1955

**Administrative History:** Regulation .49 amended effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulations .50—.52 effective August 1, 1947; repealed effective February 15, 1982 (9:3 Md. R. 220)

**Administrative History:** Regulation .53 effective July 29, 1968; amended effective May 25, 1977 (4:11 Md. R. 866); January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .53C amended effective April 4, 1980 (7:7 Md. R. 706)

**Administrative History:** Regulation .53D, E amended effective September 28, 1981 (8:19 Md. R. 1563)

**Administrative History:** Regulation .53-1 adopted as an emergency provision effective June 7, 1977 (4:13 Md. R. 1023); adopted permanently effective August 31, 1977 (4:18 Md. R. 1392)

**Administrative History:** Regulation .53-1 repealed effective October 5, 1987 (14:20 Md. R. 2140)

**Administrative History:** Regulation .54 effective June 5, 1958; repealed effective July 14, 1978 (5:14 Md. R. 1135)

**Administrative History:** Regulation .55 effective August 1, 1947; repealed effective February 15, 1982 (9:3 Md. R. 220)

**Administrative History:** Regulation .56 effective May 27, 1955

**Administrative History:** Regulation .56 amended effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .57 effective December 4, 1973; amended effective June 27, 1980 (7:13 Md. R. 1267); January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulations .58—.58-2 effective May 5, 1955

**Administrative History:** Regulation .59 effective June 17, 1963; amended effective November 17, 1978 (5:23 Md. R. 1739); September 28, 1981 (8:19 Md. R. 1563); August 24, 1987 (14:17 Md. R. 1870); January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .59A amended effective January 1, 1990 (16:25 Md. R. 2708)

**Administrative History:** Regulation .59-1 effective June 17, 1963; repealed effective September 28, 1981 (8:19 Md. R. 1563)

**Administrative History:** Regulations .60, .61 effective August 1, 1947

**Administrative History:** Regulation .61 amended effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .62 effective November 12, 1975 (2:26 Md. R. 1559)

**Administrative History:** Regulation .63 effective October 3, 1968; amended effective August 24, 1979 (6:17 Md. R. 1391)

**Administrative History:** Regulation .64 effective December 22, 1947; amended as an emergency provision effective July 1, 1977 (4:13 Md. R. 1023); adopted permanently effective August 31, 1977 (4:18 Md. R. 1392)

**Administrative History:** Regulation .64B amended effective August 22, 1980 (7:17 Md. R. 1668)

**Administrative History:** Regulation .64-1 effective December 14, 1959; amended as an emergency provision effective July 1, 1977 (4:13 Md. R. 1023); emergency status extended at 4:23 Md. R. 1727; adopted permanently effective December 30, 1977 (4:27 Md. R. 2102)

**Administrative History:** Regulation .65 effective July 6, 1970; repealed effective April 4, 1980 (7:7 Md. R. 706)

**Administrative History:** Regulation .66 effective June 11, 1969

**Administrative History:** Regulations .67—.69 effective August 1, 1947

**Administrative History:** Regulation .67 repealed effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .68 repealed effective February 15, 1982 (9:3 Md. R. 220)

**Administrative History:** Regulation .69 repealed effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulations .70, .70-1 effective July 29, 1968; repealed effective May 25, 1977 (4:11 Md. R. 866)

**Administrative History:** Regulation .70-2 effective June 19, 1969; repealed effective May 25, 1977 (4:11 Md. R. 866)

**Administrative History:** Regulation .71 effective August 1, 1947

**Administrative History:** Regulation .71 repealed effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .72 effective February 21, 1956

**Administrative History:** Regulation .73 effective June 11, 1969; amended effective August 10, 1979 (6:16 Md. R. 1329); January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .74 effective June 11, 1969; amended effective August 17, 1977 (4:17 Md. R. 1292); January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .75 effective December 22, 1947; repealed effective July 6, 1977 (4:11 Md. R. 1081)

**Administrative History:** Regulation .76 effective September 20, 1958

**Administrative History:** Regulation .76 repealed effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulations .77, .78 effective May 7, 1948; repealed effective April 4, 1980 (7:7 Md. R. 706)

**Administrative History:** Regulation .79 effective July 22, 1953

**Administrative History:** Regulation .80 effective September 5, 1972; amended effective December 15, 1978 (5:25 Md. R. 1852)

**Administrative History:** Regulation .80F adopted effective December 26, 1980 (7:26 Md. R. 2415)

**Administrative History:** Regulation .80 repealed effective January 1, 1990 (16:25 Md. R. 2709)

**Administrative History:** Regulation .81 effective August 28, 1973

**Administrative History:** Regulation .82 effective February 6, 1970

**Administrative History:** Regulation .82 amended effective January 1, 1989 (15:26 Md. R. 2979)

**Administrative History:** Regulation .83 effective August 28, 1973; amended effective July 20, 1977 (4:15 Md. R. 1145); August 10, 1979 (6:16 Md. R. 1329); August 30, 1982 (9:17 Md. R. 1704)

**Administrative History:** Regulation .84 effective August 28, 1973

**Administrative History:** Regulation .85 effective August 28, 1973; repealed effective July 28, 1978 (5:15 Md. R. 1185)

**Administrative History:** Regulations .86 and .87 effective November 17, 1978 (5:23 Md. R. 1739)

**Administrative History:** Regulations .86 and .87 repealed effective January 1, 1990 (16:25 Md. R. 2709)

**Administrative History:** Annotations:

**Administrative History:** COMAR 03.06.01.02 and 03.06.01.19A(1) cited in Attorney General Opinion No. 83-026 (June 22, 1983), dealing with the applicability of sales tax to certain veterinary products.

**Administrative History:** COMAR 03.06.01.19A(2) applied in Retail Sales Tax Division Declaratory Ruling No. 3 (March 31, 1980)

**Administrative History:** COMAR 03.06.01.53 applied in Retail Sales Tax Division Declaratory Ruling No. 2 (November 9, 1979)

**Administrative History:** COMAR 03.06.01.53D, E applied in Retail Sales Tax Division Declaratory Ruling No. 5 (March 15, 1982)

**Administrative History:** COMAR 03.06.01.67 applied in Retail Sales Tax Division Declaratory Ruling No. 1 (August 27, 1979)

**Administrative History:** COMAR 03.06.01.80 cited in Comptroller of the Treasury v. Brand Iron, Inc., 65 Md. App. 207 (1985)

**Administrative History:** COMAR 03.06.01.81 cited in Attorney General Opinion No. 86-049 (September 16, 1986)

**Administrative History:** Chapter revised effective August 20, 1990 (17:16 Md. R. 1989)

**Administrative History:** Regulation .01 amended effective January 14, 1999 (26:1 Md. R. 22); July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .01B, C amended effective March 2, 2026 (53:4 Md. R. 183)

**Administrative History:** Regulation .03 amended effective July 11, 2022 (49:14 Md. R. 704); March 2, 2026 (53:4 Md. R. 183)

**Administrative History:** Regulation .03C amended effective January 14, 1999 (26:1 Md. R. 22)

**Administrative History:** Regulation .04 amended effective December 19, 1994 (21:25 Md. R. 2104); January 14, 1999 (26:1 Md. R. 22); July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .05 amended effective December 9, 1991 (18:24 Md. R. 2641); December 19, 1994 (21:25 Md. R. 2104); January 14, 1999 (26:1 Md. R. 22); December 25, 2000 (27:25 Md. R. 2279)

**Administrative History:** Regulation .05A, B amended effective March 2, 2026 (53:4 Md. R. 183)

**Administrative History:** Regulation .07 amended effective July 11, 2022 (49:14 Md. R. 704); March 2, 2026 (53:4 Md. R. 183)

**Administrative History:** Regulation .08 amended effective December 19, 1994 (21:25 Md. R. 2104); March 2, 2026 (53:4 Md. R. 183)

**Administrative History:** Regulation .08A amended effective January 15, 2007 (34:1 Md. R. 31)

**Administrative History:** Regulation .08B, D amended effective August 19, 2013 (40:16 Md. R. 1340)

**Administrative History:** Regulation .08D amended effective May 1, 2000 (27:8 Md. R. 796)

**Administrative History:** Regulation .09 amended effective January 14, 1999 (26:1 Md. R. 22); April 2, 2001 (28:6 Md. R. 620)

**Administrative History:** Regulation .09B amended effective August 19, 2013 (40:16 Md. R. 1340); July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .10 amended effective October 2, 2000 (27:19 Md. R. 1725); March 31, 2003 (30:6 Md. R. 418)

**Administrative History:** Regulation .10A, D amended effective December 19, 1994 (21:25 Md. R. 2104)

**Administrative History:** Regulation .10D amended effective August 19, 2013 (40:16 Md. R. 1340)

**Administrative History:** Regulation .11 amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .11B amended effective January 15, 2007 (34:1 Md. R. 31)

**Administrative History:** Regulation .11C amended effective March 2, 2026 (53:4 Md. R. 183)

**Administrative History:** Regulation .12 amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .13B, C amended effective January 14, 1999 (26:1 Md. R. 22); July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .14 amended effective March 31, 2003 (30:6 Md. R. 418); July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .14A amended and A-1 adopted effective December 19, 1994 (21:25 Md. R. 2104)

**Administrative History:** Regulation .14E amended effective May 28, 2001 (28:10 Md. R. 946)

**Administrative History:** Regulation .15C amended effective December 19, 1994 (21:25 Md. R. 2104)

**Administrative History:** Regulation .16A amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .16B amended effective January 15, 2007 (34:1 Md. R. 31)

**Administrative History:** Regulation .18 amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .19C amended effective January 14, 1999 (26:1 Md. R. 22)

**Administrative History:** Regulation .21 amended effective July 11, 2022 (49:14 Md. R. 704); March 2, 2026 (53:4 Md. R. 183)

**Administrative History:** Regulation .22 amended effective August 19, 2013 (40:16 Md. R. 1340)

**Administrative History:** Regulation .22B, C amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .22C amended effective August 11, 1997 (24:16 Md. R. 1159)

**Administrative History:** Regulation .23 amended effective March 5, 2001 (28:4 Md. R. 417)

**Administrative History:** Regulation .24 amended effective October 5, 1998 (25:20 Md. R. 1527)

**Administrative History:** Regulation .25B amended effective October 11, 1993 (20:20 Md. R. 1567)

**Administrative History:** Regulation .25E adopted effective March 2, 2026 (53:4 Md. R. 183)

**Administrative History:** Regulation .26A, D amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .26C repealed effective December 19, 1994 (21:25 Md. R. 2104)

**Administrative History:** Regulation .28 amended effective August 19, 2013 (40:16 Md. R. 1340); March 2, 2026 (53:4 Md. R. 183)

**Administrative History:** Regulation .28A amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .28D amended effective January 14, 1999 (26:1 Md. R. 22)

**Administrative History:** Regulation .28E, G amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .29 amended effective January 15, 2007 (34:1 Md. R. 31)

**Administrative History:** Regulation .30A amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .31A amended effective May 22, 2006 (33:10 Md. R. 881); July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .31A amended and B repealed effective December 19, 1994 (21:25 Md. R. 2104)

**Administrative History:** Regulation .31A, C amended effective June 26, 2003 (30:12 Md. R. 787)

**Administrative History:** Regulation .32 amended effective October 5, 1998 (25:20 Md. R. 1527)

**Administrative History:** Regulation .32A amended effective December 19, 1994 (21:25 Md. R. 2104; August 11, 1997 (24:16 Md. R. 1559)

**Administrative History:** Regulation .32B amended effective December 19, 1994 (21:25 Md. R. 2104); August 11, 1997 (24:16 Md. R. 1159)

**Administrative History:** Regulation .32C amended effective August 11, 1997 (24:16 Md. R. 1159); May 1, 2000 (27:8 Md. R. 796)

**Administrative History:** Regulation .32 repealed effective January 15, 2007 (34:1 Md. R. 31)

**Administrative History:** Regulation .32-1 adopted effective October 5, 1998 (25:20 Md. R. 1527)

**Administrative History:** Regulation .32-1 repealed effective January 15, 2007 (34:1 Md. R. 31)

**Administrative History:** Regulation .32-2 adopted effective October 1, 2001 (28:19 Md. R. 1683)

**Administrative History:** Regulation .32-2C amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .33 adopted effective August 25, 1997 (24:17 Md. R. 1214)

**Administrative History:** Regulation .33B amended as an emergency provision effective October 1, 2018 (45:20 Md. R. 916); amended permanently effective February 11, 2019 (46:3 Md. R. 106)

**Administrative History:** Regulation .33B amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .33C adopted as an emergency provision effective October 1, 2018 (45:20 Md. R. 916); adopted permanently effective February 11, 2019 (46:3 Md. R. 106)

**Administrative History:** Regulation .34 adopted effective May 1, 2000 (27:8 Md. R. 796)

**Administrative History:** Regulation .34A amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .35 adopted effective October 30, 2000 (27:21 Md. R. 1974)

**Administrative History:** Regulation .35B, C amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .36 adopted effective March 5, 2001 (28:4 Md. R. 417)

**Administrative History:** Regulation .37 adopted effective May 28, 2001 (28:10 Md. R. 946)

**Administrative History:** Regulation .37 amended as an emergency provision effective May 15, 2006 (33:15 Md. R. 1271); emergency status expired September 30, 2006

**Administrative History:** Regulation .37 amended as an emergency provision effective July 30, 2010 (37:18 Md. R. 1211); amended permanently effective September 6, 2010 (37:18 Md. R. 1213)

**Administrative History:** Regulation .38 adopted effective September 3, 2001 (28:17 Md. R. 1554)

**Administrative History:** Regulation .38A, B amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .39 adopted effective June 24, 2002 (29:12 Md. R. 926)

**Administrative History:** Regulation .39 amended effective June 15, 2009 (36:12 Md. R. 836)

**Administrative History:** Regulation .39B amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .40 adopted effective November 11, 2002 (29:22 Md. R. 1720)

**Administrative History:** Regulation .41 adopted effective March 31, 2003 (30:6 Md. R. 418)

**Administrative History:** Regulation .41 amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .41D, E repealed effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .42 adopted effective June 26, 2003 (30:12 Md. R. 787)

**Administrative History:** Regulation .43 adopted effective August 19, 2013 (40:16 Md. R. 1341)

**Administrative History:** Regulation .44 adopted as an emergency provision effective January 20, 2011 (38:4 Md. R. 261); emergency status extended to December 6, 2011 (38:14 Md. R. 787); emergency status expired December 6, 2011

**Administrative History:** Regulation .44 adopted effective February 16, 2015 (42:3 Md. R. 314)

**Administrative History:** Regulation .45 adopted effective August 19, 2013 (40:16 Md. R. 1341)

**Administrative History:** Regulation .46 adopted effective August 18, 2014 (41:16 Md. R. 944)

**Administrative History:** Regulation .46C amended effective July 11, 2022 (49:14 Md. R. 704)

**Administrative History:** Regulation .47 adopted effective August 21, 2023 (50:16 Md. R. 725)

**Administrative History:** Regulation .47 amended effective March 2, 2026 (53:4 Md. R. 183)

**Administrative History:** Regulation .48 adopted effective March 2, 2026 (53:4 Md. R. 183)

**Administrative History:** Regulation .49 adopted effective March 2, 2026 (53:4 Md. R. 183)

**Administrative History:** Regulation .50 adopted effective March 2, 2026 (53:4 Md. R. 183)

#### Regulation .01 Personal, Professional, or Insurance Services.

*COMAR 03.06.01.01*

A. Except for taxable services set forth in Tax-General Article, §11-101(m), Annotated Code of Maryland, the tax does not apply to a personal, professional, or insurance service that involves a sale as an inconsequential element for which no separate charge is made. Examples of services to which the tax does not apply are services customarily rendered by physicians, dentists, lawyers, accountants, insurance agents, pest exterminators, barbers, beauticians, funeral directors, and storage warehouseperson.

B. Purchases.

  (1) A person providing nontaxable services shall pay the tax on all purchases of materials, supplies, tools, and equipment used by the person or transferred by the person as part of the nontaxable service unless a specific statutory exemption applies, such as that for medicines and medical supplies. Examples of purchases to which the tax applies are purchases of forms, office supplies, insurance policy blanks and jackets, insecticides, grooming supplies, packing materials, and utilities.

  (2) A person providing taxable services shall pay tax on purchases of materials, supplies, tools, equipment, digital codes, digital products, and taxable services used by the person.

  (3) A person providing taxable services may, however, issue a resale certificate for the purchase of:

    (a) Tangible personal property, digital codes, or digital products transferred as part of a taxable service if the person has not used the tangible personal property, digital codes, or digital products and the tangible personal property, digital codes, or digital products are resold in unchanged form; and

    (b) Taxable services that the person has not used and that are resold in unchanged form.

  (4) Examples.

    (a) A janitorial company may purchase paper towels tax-free by issuing a resale certificate if those towels are used to stock the bathroom of a customer receiving taxable cleaning services. The janitorial company shall pay tax on its purchase of cleaning agents which the janitorial company uses to clean the bathroom of a customer receiving taxable cleaning services.

    (b) A web hosting company may rent server space from a cloud storage company tax-free by issuing a resale certificate if the server space is used to provide cloud storage for a customer purchasing web hosting services and the web hosting company has made or makes no use of the server space being resold.

C. Sales.

  (1) If a person providing personal, professional, or insurance services also makes independent sales of tangible personal property, digital codes, digital products, or taxable services, that person shall collect and remit the sales and use tax on those sales unless a specific statutory exemption applies.

  (2) Examples of sales subject to tax are sales of:

    (a) Packaged cosmetics, hair tonics, and lotions sold by barbers and beauticians.

    (b) A web design service by a graphic design company that is sold independently from the sale of a nontaxable logo design service.

#### Regulation .02 Combined Sales.

*COMAR 03.06.01.02*

A. General. A vendor shall compute and impose the tax on the total taxable price of all sales to a buyer in the same licensed business location on the same business day, whether or not at different counters or departments, without regard to the individual taxable prices of the separate items comprising the total.

B. Exception.

  (1) A vendor is not required to add the combined total of the taxable prices of a current sale with those of prior sales made to a buyer on the same day when it is impractical to determine whether in fact prior sales have been made to that buyer unless the buyer demonstrates prior purchases on that day, and requests that a combination of all taxable prices be made.

  (2) A vendor who, for any reason, fragments essentially unitary sales (such as a restaurateur who requires that food and beverages be paid for separately) may not rely on this exception.

#### Regulation .03 Repairs of Tangible Personal Property, Digital Codes, Digital Products, and Taxable Services.

*COMAR 03.06.01.03*

A. General.

  (1) The charge for labor to repair or alter existing tangible personal property, a digital code, or a digital product belonging to another for the purpose of restoring the property, digital code, or digital product to its original condition or usefulness is not subject to tax, unless the labor constitutes a taxable service described in Tax General Article, §11–101(m), Annotated Code of Maryland.

  (2) The tax does apply if the labor expended results in the creation of a new or different item.

B. Persons engaged in repairing tangible personal property, digital codes, digital products, or taxable services of others for a consideration may handle the sales and use tax on their transactions in either of the following ways:

  (1) If separate charges are made for materials incorporated in the property, digital code, digital product, or taxable service being repaired, the tax shall be applied to the charges for the materials. The resale exclusion may be claimed on purchases of materials transferred to customers under these circumstances, so long as the person transferring the materials made no use of them.

  (2) If separate charges are not made for materials incorporated in the property, digital code, digital product, or taxable service being repaired, that is, the repair and materials used in repair are charged for on a lump-sum basis, the tax may not apply to any portion of the charge to the customer. The resale exclusion may not be claimed on purchases of materials transferred to customers under these circumstances. A person making a repair of tangible personal property, a digital code, a digital product, or a taxable service who charges for the repair and materials used in repair on a lump-sum basis shall pay the tax on purchases of materials used in performing the repair. The taxability of purchases for lump-sum contracts is not affected by the fact that the person for whom the repair work is performed would not have been required to pay the tax on a separately stated charge for materials.

C. Maintenance Contracts.

  (1) The tax does not apply to a charge for a maintenance contract unless it is required to be purchased as a condition of a sale of other tangible personal property, digital code, digital product, or taxable service.

  (2) An optional maintenance contract for computer software is subject to the tax if the contract entitles the purchaser to receive without charge software products which are otherwise separately priced and marketed by the seller. In this situation, the customer shall be charged the tax on the total charge for the maintenance contract.

  (3) A person performing repairs under an optional maintenance contract, except as stated in §C(2) of this regulation, shall pay the tax on materials passing to customers, unless a separate charge is made for materials. In this latter situation, the tax shall be charged to the customer and the purchase of the materials by the person performing the repair is entitled to the resale exclusion as described in §B(1) of this regulation.

  (4) A person performing repairs under a mandatory maintenance contract or a taxable optional maintenance contract as described in §C(2) of this regulation may claim the resale exclusion on all materials passing to customers.

D. Persons engaged in repairing tangible personal property, digital codes, digital products, or taxable services shall pay the tax on all purchases of equipment, tools, consumables, taxable services, and other materials used in performing the repair work which are not transferred to customers, without regard to the method of billing employed.

E. The circumstances under which resale certificates may be issued by persons engaged in repairing tangible personal property, digital codes, digital products, or taxable services who utilize both separately stated materials and lump-sum charge bases for those repairs are set forth in Regulation .07 of this chapter.

F. The sales and use tax treatment of repairs to real property is described in Regulation .19 of this chapter.

#### Regulation .04 Published Material.

*COMAR 03.06.01.04*

A. Definition.

  (1) In this regulation, the following term has the meaning indicated.

  (2) Term Defined — Published Material.

    (a) “Published material” means any textual or graphic material disseminated to another person or persons through printed, electronic, or other media.

    (b) “Published material” includes a newspaper, magazine, periodical, chat room discussion, weblog, or any other similar product.

B. The sale of published material for a charge is subject to the sales and use tax, except as described in §C of this regulation.

C. Printing and Sale of Newspapers.

  (1) The printing and sale of newspapers that are distributed by the publisher at no charge are not subject to the sales and use tax.

  (2) The sale of an item which is to be distributed as a component part of a newspaper, such as an advertising supplement, is not subject to the tax.

D. Requirements for Classification as a Newspaper.

  (1) A publication is not a newspaper unless:

    (a) It is published and distributed not less frequently than once each month;

    (b) It does not, when its successive issues are put together, constitute a book;

    (c) It is intended for circulation among the general public;

    (d) It contains news items, legal and general intelligence, reports of current events, editorial comments, advertising matter, or other miscellaneous information of public interest.

  (2) The criteria set forth in §D(1) of this regulation are minimum requirements, the meeting of which does not necessarily result in a publication being classified as a newspaper. A publication which meets the criteria set forth in §D(1) of this regulation, but which is in fact a magazine, shopping advertiser, community newsletter, tip sheet, or other publication which is not a newspaper in the common and popularly accepted usage of the term, is not a newspaper for the purpose of this exemption. A publication is not disqualified solely because it is devoted primarily to matters of specialized interest, such as legal, mercantile, political, religious, or sporting matters.

E. The taxability of sales of photographic materials and certain other tangible personal property used in the publication of published material is described in Regulation .11 of this chapter.

#### Regulation .05 Food for Human Consumption.

*COMAR 03.06.01.05*

A. In this regulation, the following terms have the meanings indicated:

  (1) “Premises” means any building, grounds, parking lot, or other area that a food vendor owns or controls or another person makes available primarily for the use of the patrons of one or more food vendors.

  (2) “Facilities for food consumption” means items such as tables, chairs, booths, benches, counters, and stands set aside or made available for the consumption of food sold. The term does not include parking spaces for vehicles as the sole accommodation. If, however, any of the above-described equipment is located on a parking lot, this equipment constitutes “facilities for food consumption”.

  (3) “Substantial grocery or market business” means a business at which at least 10 percent of all sales of food are sales of grocery or market food items. Among other things, the sale of food that is of a type normally consumed on the premises of a restaurant, but which is packaged to carry out, does not constitute the sale of “grocery or market food items”.

  (4) “Food concessionaire under contract with the school or college or its designated contract agent” means a person who has been granted the right by a school or college to use school or college premises for the purpose of selling food.

  (5) “Educationally related” means those events where the net proceeds are used for the benefit of the school or college or which provide educational benefit to the participants.

  (6) “Crabs” means hard and soft shell crabs, but does not include crab dishes, such as crab cakes and crab soup, which are, instead, “seafood”.

  (7) “Food for immediate consumption” means:

    (a) Food obtained from a salad, soup, or dessert bar;

    (b) Party platters;

    (c) Heated food;

    (d) Sandwiches suitable for immediate consumption; or

    (e) Ice cream, frozen yogurt, and other frozen desserts, sold in containers of less than 1 pint.

  (8) “Cannabis products” means products that are composed of cannabis, cannabis concentrate, cannabis extract, or other ingredients and are intended for use or consumption, including cannabinoid beverages, edible products, oils, and tinctures.

  (9) “Food” does not include

    (a) Cannabis as defined in the Alcoholic Beverages and Cannabis Article, §1–101, Annotated Code of Maryland; or

    (b) Cannabis products.

B. Sales of food for human consumption are not subject to the tax in the following circumstances:

  (1) Sales for consumption off the premises by a food vendor who operates a substantial grocery or market business at the same location where the food is sold, except that this exemption does not apply to food:

    (a) That the vendor serves for consumption on the premises of the buyer or of a third party, and

    (b) For immediate consumption;

  (2) Sales by a church or religious organization;

  (3) Sales by a school, other than an institution of postsecondary education, including sales at a school by a food concessionaire that is under contract with the school or its designated contract agent, but not including sales at events that are not sponsored by the school or are not educationally related;

  (4) Sales to students at an institution of postsecondary education if the food charge is for a meal plan or is included in the regular charge for room and board;

  (5) Sales to patients in a hospital, including a nursing home, when the food charge is included in the regular room rate;

  (6) Sales including sales of any beverage, made in a vehicle that is being operated in the State while in the course of interstate commerce;

  (7) If the proceeds of the sale are used to support a volunteer fire company or department or its auxiliary, or a volunteer ambulance company or rescue squad or its auxiliary, a sale of food served by the company, department, squad, or auxiliary;

  (8) If the proceeds of the sale are used to support a bona fide nationally organized and recognized organization of veterans of the armed forces of the United States or auxiliary of the organization or one of its units, a sale of food or meals for consumption only on the premises, served by the organization or auxiliary;

  (9) Sales for consumption off the premises of:

    (a) Crabs, or

    (b) Seafood that is not prepared for immediate consumption;

  (10) Sales of food stamp eligible food bought with a federal food stamp coupon;

  (11) Sales of food by a nonprofit food vendor if there are no facilities for food consumption on the premises, unless the food is sold within an enclosure for which a charge is made for admission; or

  (12) Sales of milk, fresh fruit, fresh vegetables, or yogurt through a vending machine.

C. The payment of a separately stated cover charge, which does not entitle the buyer to obtain tangible personal property is not subject to tax. A minimum charge which does entitle the buyer to receive tangible personal property is subject to tax, even if the buyer does not take full advantage of it.

D. The payment by a buyer of food or beverages for human consumption on the premises of the vendor of a separately stated and identified mandatory gratuity or service charge which is in the nature of a tip is not subject to tax if the food or beverages are served to a group of not more than 10 persons. Mandatory gratuities or service charges on sales of food or beverages to a group of more than 10 persons are subject to the tax whether or not separately stated.

#### Regulation .06 Cancelled and Returned Sales.

*COMAR 03.06.01.06*

A. A vendor shall refund to a buyer the proportionate amount of sales and use tax that the buyer has paid if a sale is rescinded or cancelled or the property sold is returned to the vendor and the purchase price is wholly or partially repaid or credited. If, in lieu of a refund of the sales price, the vendor credits the amount on the buyer's account, a corresponding credit for sales and use tax previously paid by the buyer shall be made.

B. Whenever any vendor has refunded the tax paid by a buyer on a cancelled or returned sale, the vendor may deduct the amount of the purchase price refunded from the total amount reported as taxable sales and the amount of tax refunded from the total amount reported as tax collected on the vendor's sales and use tax return, provided accurate records of the transaction are maintained. Alternatively, the vendor may apply to the Comptroller for a refund of the tax properly refunded to the buyer if application for it is made in writing within 4 years from the payment of the tax.

#### Regulation .07 Sales Where It Is Impractical to Establish the Amount of Property to Be Resold.

*COMAR 03.06.01.07*

A. Except as provided in §D of this regulation, if at the time of a sale, it is impractical for the buyer to establish the actual amount of the property, digital code, digital product, or taxable service being purchased which is to be resold, the tax shall be paid on the entire amount of the sale, either if the buyer has reason to believe that a majority of the tangible personal property, digital code, digital product, or taxable service will not be resold, or if the buyer cannot determine whether or not a majority of the tangible personal property, taxable service, digital code, or digital product will be resold. If any portion of the property is later resold without having first been used by the buyer, the buyer may apply for a refund of the taxes attributable to this property, digital code, digital product, or taxable service within 4 years of the date of purchase.

B. If no tax is paid upon the purchase of tangible personal property, digital codes, digital products, or taxable services pursuant to §A of this regulation, the buyer shall include the cost of that portion converted to the buyer's personal use as a purchase subject to the sales and use tax on the return to be filed for the period in which the property was converted.

C. The procedure described in §B shall also be followed by any person who purchases tangible personal property, digital codes, digital products, or taxable services for resale without paying the tax, and who subsequently converts the property, digital codes, digital products, or taxable services to personal use.

D. A buyer who provides a vendor with a multiple points of use certificate which includes a resale to a related entity as provided for in Regulation .49 of this chapter may not apply for a refund based on a claim that it was impractical at the time of purchase to establish the amount of property to be resold.

#### Regulation .08 “Taxable Price” Defined.

*COMAR 03.06.01.08*

A. The sales and use tax is computed on the “taxable price” of a transaction subject to the tax. The term “taxable price” is broadly defined by statute to include, with certain specific exceptions, the total consideration for the transaction, which may be either in the form of money, rights, property, promises, or anything else of value, or by exchange or barter. The total monetary value of the consideration, that is, of all those things which in fact are, or are promised to be, paid or delivered by or on behalf of the purchaser, to or on behalf of the vendor in the consummation and complete performance of a sale, whether or not the vendor receives any benefit from them, constitutes the “price” on which the tax is to be computed. Deductions are not permitted for any expense or cost, including the cost of any labor or service rendered, any material used or any property, digital code, or digital product sold regardless of how any contract, invoice or other evidence of the transaction is stated or computed, except for those items specifically described in §D, or in Regulation .10 with respect to certain utilities or Regulation .28 with respect to leases.

B. Components of Taxable Price—Examples.

  (1) The following illustrate some items which might appear as a separate amount in the vendor's computation of a bill that nevertheless are a part of the “taxable price”, and which therefore may not be deducted before computation of the tax:

    (a) Any charges for any services to bring the subject of a sale to its finished state ready for delivery and in the condition specified by the buyer, including charges for assembly, fabrication, alteration, lubrication, engraving, monogramming, cleaning, or any other servicing, customizing or dealer preparation.

    (b) Any discount which is dependent upon an event occurring after consummation of the sale, such as a discount allowed for the prompt payment of a bill.

    (c) Any charge based on the amount or frequency of a purchase, such as a small order charge, the method of billing, such as a split billing, or the nature of the item sold, such as a slow-moving charge for an item not frequently sold.

    (d) Excise or other taxes not statutorily imposed directly upon the buyer or act of buying and for which the buyer has no direct legal liability independent of any contractual obligation to the vendor, regardless of how they are stated, such as manufacturer's, wholesaler's, or retailer's taxes, except for certain utility taxes described in Regulation .10 and certain personal property taxes in lease situations as described in Regulation .28.

    (e) Any commission or other form of compensation for the services of an agent, factor, consultant, broker, or similar person.

    (f) Any charges for warranties, maintenance or service agreements, or insurance coverage required by the vendor to be taken as a condition of the sale. If the sale could be consummated without the payment of these charges, the charges, unless for a taxable service as described in Tax-General Article, §11-101(m), Annotated Code of Maryland, are not part of the taxable price if separately stated. For example, if the lessee of an automobile who has a contractual obligation to return the automobile undamaged may elect to purchase insurance protecting the lessee against the possibility of having to pay for damages, but need not purchase this insurance in order to lease the vehicle, a separately stated charge for this insurance is not part of the taxable price.

    (g) Any portion of the price described as a “donation”, when the donation is in fact required by the vendor as a condition of the sale.

    (h) The amount of any rebate which may be made to the buyer by anyone other than the vendor, or by the vendor upon the performance by the buyer of any condition following the sale.

  (2) The following illustrate some forms of consideration that might be tendered by or on behalf of the buyer, the values of which are a part of the “taxable price” and therefore may not be deducted before computation of the tax:

    (a) The transfer, whether in the nature of a “trade-in”, return, exchange, or otherwise, of anything to the vendor, regardless of whether the buyer may have paid any tax on acquisition of the item or service transferred or whether, in the case of a return or exchange, the buyer may be entitled to any refund of tax previously paid.

    (b) The assumption of any liabilities of, or attributable to, the vendor.

    (c) The performance of any personal or other services for or on behalf of the vendor.

    (d) Except for a federal food coupon, the face value of any coupon, voucher, or similar item issued by any person, including a manufacturer, government agency or the vendor, for which the vendor can be reimbursed or compensated in any form by a third party. This includes compensation in the form of advertising or promotion such as with an online deal-of-the-day eCoupon or similar discount. The presentation of a coupon for which there exists no arrangement for reimbursement to the vendor by any third party, such as a store coupon that in effect establishes a lower price, is not part of the taxable price.

C. “Taxable price” includes, for a short-term vehicle rental as defined under Tax-General Article, §11-104(c), Annotated Code of Maryland, all sales and charges made in connection with the short-term vehicle rental, including insurance, freight handling, equipment and supplies, delivery and pickup, cellular telephone, and other accessories, but not including sales of motor fuel subject to the motor fuel tax.

D. Each of the following items, if made in connection with the sale and clearly identified with the consideration stated separately from any other item by documentary evidence in existence and made known to the buyer at the time of sale, is not a part of the “taxable price” and is therefore deductible from the total consideration before computation of the tax:

  (1) A charge for labor or service used for application or installation, so long as the charge does not include any amounts described in §B of this regulation, and in particular §B(1)(a), or any other fabrication.

  (2) A charge for a professional service, except for a taxable service.

  (3) Any amounts paid by the buyer as a finance charge, interest, or similar charge for credit extended to the buyer.

  (4) A charge for a delivery, freight, or other transportation service for delivery directly to the buyer by the vendor or by another person acting for the vendor. This does not include any charge:

    (a) To transport the property from a third party to any location of the vendor;

    (b) To transport the property from any location of the vendor to another location of the vendor; and

    (c) For transmission, distribution, or delivery of electricity or natural gas, if the sale or use of the electricity or natural gas is subject to the sales and use tax.

  (5) Any consumer excise taxes imposed by a governmental unit directly upon the buyer or act of purchase.

  (6) A deposit posted to insure the return of an item taken from the vendor which the vendor expects to have returned, and which will be refunded in full upon the return of the item.

  (7) Any trade, wholesale, volume, employee, cash, or other discount irrevocably applied at the time of sale which in effect establishes a new price, and which is not dependent on any condition or event subsequent to the sale.

  (8) Any amount paid by a buyer of food or beverages for human consumption on the premises of the vendor as a mandatory gratuity or service charge which is in the nature of a tip, if the food or beverages are served to a group of not more than 10 persons. Mandatory gratuities or service charges on sales of food or beverages to a group of more than 10 persons are part of the “taxable price” whether or not separately stated, and therefore may not be deducted before computation of the tax.

  (9) A charge for any service for the operation of equipment used for the production of audio, video, or film recordings.

  (10) The value of a user component or part (core value) received from a purchaser of the following remanufactured truck parts:

    (a) An air brake system;

    (b) An engine;

    (c) A rear axle carrier; or

    (d) A transmission.

#### Regulation .09 Sale of Medicines, Medical Supplies, Tobacco Cessation Products, Sickroom Equipment, and Certain Medical Equipment.

*COMAR 03.06.01.09*

A. The sales and use tax does not apply to sales of medicines, disposable medical supplies, tobacco cessation products, sickroom equipment, certain medical supplies, and certain medical equipment.

B. For the purposes of Tax-General Article, Title 11, Annotated Code of Maryland, the following terms have the meanings indicated:

  (1) Medical Equipment.

    (a) “Medical equipment” means equipment that:

      (i) Can withstand repeated use;

      (ii) Is used exclusively to serve a medical purpose;

      (iii) Is not useful to a person in the absence of illness or injury; and

      (iv) Is for use in the home or on the individual's person.

    (b) “Medical equipment” includes, but is not limited to, the following items:

      (i) Overbed table;

      (ii) Wheelchair tray;

      (iii) Pressure or pressure sore relief products;

      (iv) Bath and toilet safety products;

      (v) Respiratory equipment;

      (vi) Trapeze bar;

      (vii) Traction equipment;

      (viii) Patient lifts;

      (ix) Geriatric chair;

      (x) Thermaphores, heating pads, cervical pillows, medical corsets, elastic bandages;

      (xi) All types of braces, casts, mastectomy bras and forms;

      (xii) Apnea monitors, infant breathing monitors, blood glucose monitors, and heart monitors; and

      (xiii) Stairlifts, unless installed in such a manner that they become part of the real property.

    (c) “Medical equipment” does not include:

      (i) Lift chairs;

      (ii) Exercise equipment;

      (iii) Air conditioners;

      (iv) Humidifiers;

      (v) Dehumidifiers;

      (vi) Vibrators;

      (vii) Massagers;

      (viii) Bedside cabinets;

      (ix) Receptacles for medical waste;

      (x) Blood pressure devices;

      (xi) Thermometers;

      (xii) Scales of any type; and

      (xiii) Devices used to obtain or monitor pulse or respiration, such as pulse oximeters, control diascans, Doppler diagnostic equipment, and mini-Dopplers.

    (d) “For use in the home” includes a nursing home or other assisted care facility, but only to the extent that the equipment remains in the room in which the patient sleeps and is used regularly and exclusively by the patient in that room. Equipment that is used generally for patients throughout the nursing home or other assisted care facility is not considered to be for use in the home. Thus, equipment used in examination, treatment, operating, delivery, and therapy rooms or moved from patient room to patient room in a nursing home or other assisted care facility is not exempt.

  (2) “Medical supplies” means an article used in the cure, mitigation, treatment, prevention, or diagnosis of illnesses. Disposable medical supplies are medical or surgical supplies consumed in a single usage and do not include skin care creams or cleansers. Medical supplies do not include nondisposable surgical supplies, or medical or surgical equipment.

  (3) “Medicine” means a preparation or substance intended for use in the cure, mitigation, treatment, or prevention of illnesses. The term includes drugs sold on prescription of physicians, drugs for which no prescription is required, and proprietary and patent medicines. The term does not include cosmetics, dentifrices, shaving and hair care products, soaps, deodorants, or skin care creams or cleansers. A product that is primarily cosmetic in nature is not “medicine” even though it may contain medicinal properties.

  (4) “Sickroom equipment” means “medical equipment” as defined in §B(1) of this regulation.

  (5) “Tobacco cessation products” means nicotine patches, nicotine gum, or any other product intended for use as an aid in tobacco use cessation and approved by the United States Food and Drug Administration for that purpose.

#### Regulation .10 Natural and Artificial Gas, Electricity, Steam, Oil, and Coal.

*COMAR 03.06.01.10*

A. Consumption in Production Activities or to Produce Snow for Commercial Services.

  (1) The sale of gas, electricity, steam, oil, or coal, consumed directly and predominantly in a production activity or used to operate machinery and equipment used to produce snow for commercial purposes or for use in residential condominiums is not subject to the tax. Production activities do not include processing food or a beverage by a retail food vendor or operating administrative or commercial facilities, such as offices, sales and display rooms, retail outlets and storage facilities, including refrigerated storage facilities.

  (2) If electricity, gas, or steam is sold through a single meter for both exempt and taxable uses, the purpose which consumes the majority of the electricity, gas, or steam is the basis for determining the taxability of the sale. The buyer shall determine the majority usage, considering the relative connected load for each purpose and the relative time of operation of each over a period of 1 year, unless the circumstances of a particular case require a different period. Similarly, the taxability of purchases of oil or coal is determined by the majority use where it is impracticable to measure separately the amount purchased for each purpose.

  (3) If the sale of electricity or natural gas is exempt from tax, the sale of the transmission, distribution, or delivery of that electricity or natural gas is also exempt from tax.

  (4) In order to obtain this exclusion, the buyer of gas, electricity, steam, oil, or coal shall present to the vendor of the commodity and the vendor of the transmission, distribution, or delivery service a certification, upon a form available from the Comptroller, setting forth the basis for the claimed exemption. Upon presentation of the completed and signed form, the vendor may not collect the tax until notified by the Comptroller to resume collection or until the certification is revoked by the buyer. The buyer shall revoke the certification when no longer entitled to an exclusion under the terms of this regulation.

B. Exempt Buyers.

  (1) A person operating a nonprofit religious, charitable, or educational organization possessing an exemption certificate issued by the Comptroller under Regulation .22 of this chapter, and other persons possessing an exemption certificate issued by the Comptroller, may claim exemption for the tax on gas, electricity, steam, oil, coal, or the transmission, distribution, or delivery of electricity or natural gas by providing a photocopy of this certificate to the vendor.

  (2) A member of a foreign diplomatic corps may purchase gas, electricity, steam, oil, coal, or the transmission, distribution, or delivery of electricity or natural gas free of tax by presenting to the vendor the evidence of exemption issued by the United States Department of State.

C. Tax Basis.

  (1) The tax on sales of gas, electricity, steam, oil, coal, or on charges for the transmission, distribution, or delivery of electricity or natural gas does not apply to late payment penalties imposed as a gross charge or in any other form.

  (2) The taxable price on sales of gas, electricity, steam, oil, coal, or on charges for the transmission, distribution, or delivery of electricity or natural gas does not include the amount of a tax imposed by a county with respect to these sales.

  (3) The taxable price on sales of electricity or on charges for the transmission, distribution, or delivery of electricity does not include the environmental surcharge which may be added to the customers' bills pursuant to Natural Resources Article, §3-302(a), Annotated Code of Maryland.

D. Residential Sales.

  (1) A sale of electricity, steam, or artificial or natural gas that is delivered under a residential or domestic rate schedule on file with the Public Service Commission is not subject to the tax.

  (2) A sale of coal, firewood, heating oil, or propane gas, or any similar liquefied petroleum gas for use in residential property that contains not more than four units, cooperative housing, condominiums, and other similar residential living arrangements is not subject to the tax. The following apply:

    (a) If it is impracticable to measure separately the amount of coal, firewood, heating oil, or propane gas or any similar liquefied petroleum gas purchased for both residential and nonresidential purposes, the exemption will apply only if the majority of the usage is for residential purposes.

    (b) If a vendor is unable to determine that the majority usage test has been met, the tax shall be charged unless the buyer provides a statement to the effect that a majority of the coal, firewood, heating oil, or propane gas, or any similar liquefied petroleum gas will be used for residential purposes. If the coal, firewood, heating oil, or propane gas, or any similar liquefied petroleum gas is used solely for heating purposes, the buyer shall determine majority usage on the basis of the relative space devoted to residential and nonresidential purposes.

  (3) All sales of propane gas in containers less than 60 pounds are presumed to be for recreational, rather than residential, use and are therefore subject to the tax.  Sales of propane gas in containers of any size that are not for residential use, or if the majority of the usage is not for residential purposes as set forth in §D(2) of this regulation, are subject to the tax.

E. Wood and Wood Products. A sale of wood, wood bark or residue, or refuse-derived fuel is not subject to the tax when used for heating purposes.

#### Regulation .11 Printing.

*COMAR 03.06.01.11*

A. Printed material means material produced by a mechanical process involving the transfer of text, images, or designs to tangible personal property.

B. Charges for Printing and Sales of Printed Material.

  (1) Charges for the printing of tangible personal property by special order and sales of printed material by special order when made to ultimate consumers are subject to tax.

  (2) Charges for printing and sales of printed material for the purpose of resale in unchanged form or incorporation into a product which is to be sold are not subject to the tax. Examples of nontaxable charges are as follows:

    (a) Charges for the printing and sale of labels or name plates to a person who will affix them to a product intended for sale;

    (b) Charges for the printing and sale of tangible personal property used to package products held for sale where the packaging is nonreturnable;

    (c) Charges for the printing and sale of direction sheets, instruction books, warranties, and other printed matter packaged with or obtainable only with the purchase of products held for sale.

  (3) If the charges for printing or a sale of printed material is subject to the tax, the tax applies to the total charge without deduction for separately itemized charges for property or services required to bring the printed matter to its completed state. Separately itemized delivery charges, including charges for postage, addressing, stamping, sealing, inserting, or wrapping, may be excluded from the charges subject to the tax.

C. Sales to a Person Engaged in Printing.

  (1) Tangible personal property or digital products which will be incorporated into printed material which is to be resold, such as ink, paper, staples, stapling wire, binding materials, and digital artwork, or which will be consumed in manufacturing printed material which is to be resold, may be purchased free of tax through the issuance of resale certificates.

  (2) A sale of artwork, hand or machine compositions, lithographic plates or negatives, or typographies, whether in tangible or digital form, to a person engaged in the printing of tangible personal property for sale and for direct use by the person to produce that property for sale is exempt from the tax. The following apply:

    (a) A person selling any item referred to above, other than an item which is photographic in nature, shall pay the tax on all materials purchased to produce this item. A printer who produces an exempt item for self use is required to pay the tax on purchases of material used to produce that item.

    (b) This exemption does not apply to a sale of a described item to a person who will not use it to produce tangible personal property for sale. A person making a taxable sale of this item may buy material which is to be resold, consumed directly and predominantly in production activities, or incorporated in the finished item free of tax through the issuance of resale certificates.

#### Regulation .12 Casual and Isolated Sales.

*COMAR 03.06.01.12*

The sales and use tax does not apply to a casual and isolated sale by a person who regularly does not sell tangible personal property, a digital code, a digital product or a taxable service if the sale price is less than $1,000 and the sale is not made through an auctioneer or a dealer. In determining whether the $1,000 limitation has been exceeded, all sales made on the same occasion or as part of the same transaction by the same vendor to the same buyer shall be combined.

#### Regulation .13 Certain Capital Transactions.

*COMAR 03.06.01.13*

A. Certain specific capital transactions are exempted from taxation.

B. For the purpose of these exemptions:

  (1) The term “stock” means equity securities, including any equity security convertible into any other class of equity security, any warrant, and any right to subscribe to or purchase any equity security. The term “stock” does not include any securities which are redeemable for cash at the option of the holder, or which are convertible into any form of debt securities.

  (2) The term “transfer” means a transfer of personal property, a digital code, or a digital product:

    (a) Under a reorganization within the meaning of §368(a) of the Internal Revenue Code;

    (b) Upon organization of a corporation or joint-stock company, to the corporation or company principally in consideration for the issuance of its stock;

    (c) To a partnership only as a contribution to its capital or in consideration for a partnership interest in the partnership; or

    (d) To a limited liability company only as a capital contribution or in consideration for an interest in the limited liability company.

  (3) A transfer of tangible personal property, a digital code, or a digital product to a corporation upon its organization is “principally in consideration for the issuance of its stock”, if the aggregate value in money of the consideration other than its stock, issued, paid, or transferred by the corporation in exchange for the tangible personal property, digital code, or digital product is less than 50 percent of the fair market value of the tangible personal property, digital code, or digital product received by the corporation. The transfer to or assumption of liability by a corporation upon its organization is not “consideration other than its stock”, if, without regard to any dollar limitation, the entire transaction would otherwise qualify as an exempt casual and isolated sale.

C. Transactions Not Subject to the Tax.

  (1) A transfer of tangible personal property, a digital code, or a digital product to a corporation or joint-stock company upon its organization, principally in consideration for the issuance of its stock, is not subject to tax. The transfer will not be considered to be upon the organization of a corporation unless the Articles of Incorporation were filed for record with the appropriate State authority not more than 6 months before the transfer, and the corporation has not been actively engaged in business for more than 30 days before the transfer.

  (2) A transfer of tangible personal property, a digital code, or a digital product to a limited liability company only as a capital contribution or in consideration for an interest in the limited liability company is not subject to tax.

  (3) A transfer of tangible personal property, a digital code, or a digital product made pursuant to a reorganization within the meaning of §368(a) of the Internal Revenue Code is not subject to tax. An Internal Revenue Service ruling or opinion of counsel as to qualification under these sections is evidence of entitlement to this exclusion.

  (4) A distribution of tangible personal property, a digital code, or a digital product by a corporation to its stockholders as a complete or partial liquidating distribution, whether [or not] made pursuant to the dissolution of the corporation, is not subject to tax. The transfer of tangible personal property, digital codes, or digital products is not a liquidating distribution if any consideration, other than the surrender of stock of the corporation, is paid for the property, digital code, or digital product transferred.

  (5) A transfer of tangible personal property, a digital code, or a digital product to a partnership solely as a contribution to the capital of a partnership, or in consideration for a partnership interest, made at any time, by any existing or new partner, is not subject to tax. If any consideration is paid for the property transferred other than an interest in the partnership, the transfer is subject to tax. The transfer to or assumption of liability by a partnership is not consideration paid by the partnership, if, without regard to any dollar limitation, the entire transaction would otherwise qualify as an exempt casual and isolated sale.

  (6) A distribution of tangible personal property, a digital code, or a digital product by a partnership to its partners or by a limited liability company to a member is not subject to tax. A transfer which is not in the nature of a distribution of earnings or profits or a return of capital (such as a sale in the ordinary course of business) is subject to tax.

#### Regulation .14 Resale Certificates.

*COMAR 03.06.01.14*

A. Definitions.

  (1) In this regulation, the following terms have the meaning indicated.

  (2) Terms Defined.

    (a) “Antique” means any item of personal property that:

      (i) Was made in an earlier period;

      (ii) Has special value because of its age; and

      (iii) Is at least 70 years old.

    (b) Used Collectible.

      (i) “Used collectible” means an item of personal property that has been previously sold at retail as a new item and in which there is a general interest in collecting the item.

      (ii) A general interest in the collection of an item is demonstrated by sales of the item at antique and collectible shows and shops or the existence of associations or publications dedicated to the collection of the item.

B. Except as provided in §§C and D of this regulation, the duty of a vendor to collect the sales and use tax from a buyer is waived if the buyer provides the vendor with a signed resale certificate. The resale certificate need not be in a particular form, but it shall state the name, address, and the Maryland sales and use tax registration number of the buyer, and state that the tangible personal property, digital code, digital product, or taxable service is bought for the purpose of resale.

C. Purchases for Less Than $200.

  (1) A vendor may not accept a resale certificate from a buyer for purchases of less than $200 using cash, check, credit card, debit card, or electronic transfer of funds, unless the vendor delivers the goods directly to the buyer's retail place of business.

  (2) A buyer may obtain a refund of sales and use tax paid on a purchase described in §C(1) of this regulation, if made for resale by claiming a credit on the next sales and use tax return or filing a claim for refund.

D. Sale of an Antique or Used Collectible.

  (1) For the sale of an antique or used collectible, the duty of a vendor to collect the sales and use tax from the buyer is waived if the buyer provides the vendor with a signed resale certificate that contains the information set forth in §B of this regulation, except instead of a Maryland sales and use tax registration number, the certificate states that the buyer is an out-of-State vendor who does not sell or deliver tangible personal property or a taxable service for use in Maryland; does not otherwise engage in the business of an out-of-State vendor as described in Tax-General Article, §11-701(b), Annotated Code of Maryland; or does not meet the thresholds for economic nexus as defined in Regulation .33B(5) of this chapter, and:

    (a) Contains:

      (i) The sales and use tax registration number of another state; and

      (ii) A copy of a sales and use tax registration license issued to the buyer from that state; or

    (b) If a buyer is from a state without a sales and use tax, instead of a sales and use tax registration license and number, a copy of a trader's license from that state or a comparable type of identification.

  (2) Except as set forth in this section, all other requirements of this regulation including those of §C of this regulation, apply to the sale of an antique or used collectible.

E. A vendor shall obtain a resale certificate before a sale is consummated to support every transaction for which the resale exclusion is claimed. A buyer making repeated purchases from a vendor may provide a blanket resale certificate to the vendor and claim the resale exclusion on subsequent purchases by providing the buyer's Maryland sales and use tax registration number on its purchase orders.

F. When the Comptroller notifies a vendor of an intent to assess the tax on transactions for which the vendor does not possess proper resale certificates, the vendor shall have 60 days from the mailing of this notice to obtain the certificates. If the vendor fails to obtain proper resale certificates within this 60-day period, the Comptroller's assessment is final.

G. A vendor may not accept a resale certificate at any time, including the 60-day grace period, if at the time of acceptance the vendor knows or should know that the sale is not for resale.

H. Maryland sales and use tax registration numbers contain 8 digits, the first of which is always either a zero or a one. Numbers issued by other jurisdictions, federal employer or Social Security numbers, or numbers containing alphabetic characters are not valid on a resale certificate.

I. In third-party drop shipment transactions, in which a Maryland registered vendor sells to an out-of-State unregistered vendor and the property is delivered to a Maryland location, the Maryland vendor shall either require the out-of-State vendor to register for Maryland sales and use tax purposes and provide a proper resale certificate, or charge the tax based on the selling price to the out-of-State vendor. The obligation of the Maryland-registered vendor to obtain a proper resale certificate bearing a Maryland registration number or charge the tax is not changed because the out-of-State vendor is in fact making a sale for resale or the Maryland customer is entitled to the resale exclusion or any other exemption.

J. Vendors may accept resale certificates that bear the exemption certificate number issued to a religious organization instead of a sales and use tax registration number. Sales and use tax exemption certificate numbers issued to religious organizations consist of 8 digits, the first two of which are always "29". Other private exempt entities may not use their exemption certificate numbers on resale certificates. These entities shall register as vendors and use their sales and use tax registration numbers on resale certificates.

#### Regulation .15 Containers.

*COMAR 03.06.01.15*

A. The resale exclusion includes not only the purchase for resale of the particular products or their components but also the containers, cartons, bottles, pallets, packing, and their components sold with these products.

B. A vendor may claim the resale exclusion on the purchase of returnable containers, provided that the vendor uses them solely to deliver other property for sale. If the vendor makes any use of the containers for other purposes, the resale exclusion does not apply.

C. The resale exclusion does not apply to purchases of containers which will not be used to package tangible personal property for sale. For example, the tax applies to the purchase of materials used to package an item transferred in a nontaxable service transaction, such as the sale to a dry cleaner of boxes and plastic bags.

D. Except for sales to farmers, the claim for the resale exclusion on purchases of containers is made through the issuance of resale certificates. Sales of containers to farmers to transport products the farmer raises are expressly exempt and need not be supported with resale certificates.

#### Regulation .16 Photography.

*COMAR 03.06.01.16*

A. The sale of a photograph, photocopy, or blueprint is subject to tax whether delivered to the buyer electronically or in tangible form. When the product is delivered in tangible form, the tax also applies to separately stated charges for portrait photography, motion picture and videotaping production, and the development and printing of a picture.

B. The tax applies to rental charges for equipment used for the production of audio, video, or film recordings. Charges for services to operate this equipment are not subject to the tax if they are separately stated, identified, and made known to the buyer at the time of sale.

#### Regulation .17 Dry Cleaners and Laundries.

*COMAR 03.06.01.17*

A. Persons operating dry cleaning establishments and laundries are required to collect the tax on receipts from their services when these services are performed for a person engaged in business, such as restaurants, hotels, motels, beauty shops, barber shops, and other such establishments, which require the regular cleaning and laundering of their linens and textiles. When the service is performed for a dry shop, the person providing the laundry and dry cleaning service shall obtain a resale certificate from the dry shop operator.

B. Laundries and dry cleaners who rent textiles shall collect the tax on the rentals and may issue a resale certificate for the purchase of the textiles.

C. Laundry and dry cleaning services performed for individuals of their personal laundry are exempt from the tax.

D. This exemption also includes domestic diaper service.

#### Regulation .18 Florists.

*COMAR 03.06.01.18*

The tax shall be collected on orders taken by a Maryland florist or nursery to be sent to a second florist or nursery, whether the delivery is to be made within or without the State. A florist or nursery making deliveries pursuant to orders received from another florist or nursery may not collect the tax regardless of whether the florist or nursery forwarding the order is within or without this State.

#### Regulation .19 Real Property Construction, Improvement, Alteration, and Repair.

*COMAR 03.06.01.19*

A. The sale of tangible personal property to a person who will use or resell it in the form of real property is taxable. Therefore, a person who constructs, improves, alters, or repairs real property shall pay the tax on all materials purchased, which will be incorporated into real property in such a manner that the materials will lose their identity as tangible personal property.

B. Taxability is not affected by language in a real property construction contract or subcontract such as “tax included” or “tax exempt”, except as provided in §D of this regulation or by any form of payment under the real property construction contract or subcontract, whether lump-sum, cost-plus, time and material, or otherwise.

C. Determination of Material as Real Property.

  (1) The determination of whether material installed or annexed to real property will become a part of the real property depends principally upon the intention of the person making the annexation.

  (2) If the intention of the annexation is to permanently and substantially improve land, a building, or other real property, the material will be considered to have become real property. An installed or annexed item which is an integral, necessary, and expected part of real property constitutes a permanent and substantial improvement to the real property.

  (3) If the intention of the annexation is for a temporary purpose, that is, for the enjoyment or use of the material as a chattel or personalty, the material will be considered to retain its character as tangible personal property. Machinery used in a production activity retains its character as tangible personal property without regard to the method or permanency of its annexation to real property. Farm equipment, a foundation in support of machinery and equipment used in a production activity and any machinery, device, or equipment which is required for conformance with air or water pollution laws or regulations retain their character as tangible personal property.

  (4) Factors to be considered in determining the intention of the party making the annexation are the:

    (a) Nature of the article annexed;

    (b) Mode of annexation;

    (c) Purpose for which it was annexed; and

    (d) Practicality and feasibility of removal of the annexed article.

  (5) As a general rule, counters, countertops, and cabinetry installed in commercial spaces will be treated as tangible personal property. Doors, windows, molding, built-ins, and kitchen cabinetry installed in residential or commercial spaces will be treated as realty.

D. A person who, because of a contractual obligation, purchases material which will be incorporated into the real property of a private, nonprofit charitable, educational, or religious organization, or volunteer fire, ambulance, or rescue company or squad, located in Maryland, may use the exemption certificate issued to the organization to purchase the material tax-free. In order to purchase the material tax-free, the buyer shall certify to the supplier, in a signed statement, that the material will be incorporated into the real property of the exempt organization. The buyer shall include in the statement the name and exemption certificate number of the organization, and the date and identification of the contract for which the materials are purchased. No specific format for the statement is required, nor are forms supplied by the Comptroller. Buyers and suppliers may use any format which contains the required information. The following is an example of an acceptable format:

E. The exemption for the purchase of building material described above applies only when the final recipient of the material is a private, nonprofit charitable, educational, or religious organization, or volunteer fire, ambulance, or rescue company or squad, located in Maryland, which has been issued an exemption certificate. Purchases of material which will be incorporated into the real property of any other person or organization, whether or not that person or organization may be exempt from tax for any reason, are subject to tax in accordance with §A, above. Therefore, for example, purchases of material which will be incorporated into the real property of the State of Maryland, including its political subdivisions, the U.S. Government, including its agencies and instrumentalities, diplomatic embassies, or credit unions, are subject to tax.

F. The retail sale or use of all equipment, tools, expendable supplies, and other items which are used to improve real property and are not incorporated into the realty, is subject to tax in all instances.

#### Regulation .20 Games and Amusements.

*COMAR 03.06.01.20*

A. Charges made for the privilege of bowling, golfing, swimming, and for playing billiards, pingpong, tennis, squash, badminton, and similar sports are not sales of tangible personal property and are not subject to the tax.

B. Persons who offer these privileges to the public are considered the consumers of all materials and supplies which they purchase to operate the establishments and shall pay the tax to their vendors.

C. Rentals of sporting equipment are subject to the tax.

#### Regulation .21 Time of Collection.

*COMAR 03.06.01.21*

A. A sale is a transaction for the present or future transfer of title or possession of tangible personal property, a digital code, or a digital product or for the performance of taxable services, for a consideration, and the tax imposed on a retail sale applies when the transaction is entered into, regardless of when the consideration is to be paid, the tangible personal property, digital code, or digital product is to be delivered, or the services are to be performed. Except as provided by this regulation or for a rental, lease, subscription, or license for use, the vendor shall collect the tax from the buyer when the sale occurs.

B. Exception for Certain Credit or Installment Sales.

  (1) If a vendor makes a credit or installment sale of tangible personal property, taxable services, digital codes, or digital products which the vendor must manufacture, design, create, custom-alter, or order from a third party, collection of the tax may be deferred at the option of the vendor until the property, digital code, digital product, or taxable service is delivered. Among other things, this exception does not apply to a sale, such as a lay-away sale, when delivery of existing property in the possession of the vendor is delayed pending full payment.

  (2) The vendor may not defer collection of the tax beyond the time of full payment for or delivery of the property, taxable service, digital code, or digital product, whichever occurs first. A vendor obligated to make more than one delivery as a result of a single sale of property, services, digital codes, or digital products which the vendor must manufacture, design, create, custom-alter, or order from a third party may defer collection of the tax on the portion of the price attributable to each delivery until payment of that portion of the price or the date of that delivery, whichever occurs first.

  (3) If a sale as to which a vendor has elected to defer collection of the tax is cancelled and, for any reason, less than the full amount of any payment is returned to the buyer, the vendor shall allocate the amount retained as between taxable price and tax and remit that tax with the next return to the Comptroller.

  (4) The authority to defer collection of the tax created by this section does not affect the nature or amount of the vendor's or buyer's liability as created at the time of entering into a transaction but only affects the time of collection of the tax.

    (a) If a change in the tax rate occurs between the time of sale and the time of delivery of tangible personal property, a digital code, a digital product, or a taxable service, the original tax rate shall apply.

    (b) If the sale of the tangible personal property, digital code, digital product, or service is not taxable at the time the sale occurs, the sale does not become taxable if the tangible personal property, digital code, digital product, or service becomes taxable after the sale but before the items or services are delivered.

    (c) If the sale of the tangible personal property, digital code, digital product, or service is taxable at the time the sale occurs, the sale is taxable even if the tangible personal property, digital code, digital product, or service would not be taxable at the time the items or services are delivered.

  (5) Examples.

    (a) Example 1. A contract for the sale of tangible personal property is entered into on June 10. The contract states the property is to be delivered July 10, and requires a single payment due by August 10. Effective July 1 the same year, the rate of sales and use tax on the tangible personal property increases from 5 percent to 6 percent. The vendor is required to collect the tax on the transaction at the 5 percent rate that is in effect on June 10. The tax must be collected no later than the delivery date, July 10.

    (b) Example 2. A contract for the sale of tangible personal property is entered into on June 10. The contract states the property is to be delivered July 10 and requires a single payment due by August 10. Effective July 1 the same year, the tangible personal property is exempt from the sales and use tax. The vendor is required to collect the tax on the transaction at the rate that was in effect on June 10. The tax must be collected no later than the delivery date, July 10.

    (c) Example 3a. A contract for the sale of computer systems integration design consulting services is entered into on January 1, 2025. Services are to be delivered over a negotiated period of 5 years, from March 1, 2025, through February 28, 2030. The contract states the total price for the services is $5,000,000 to be paid in installments upon completion of milestones as defined by the contract. At the time of sale, computer systems integration design consulting is a nontaxable service. Computer systems integration design consulting becomes taxable effective July 1, 2025. Although some installment payments are made after the change in the taxability of the service, taxability for this contract is determined as of the date of sale, which is January 1, 2025. Because the service was not taxable at the date of sale, no sales and use tax is due on any of the installment payments.

    (d) Example 3b. Assume the facts in Example 3a, except the January 1, 2025 contract also includes an option for additional data or information technology services at a set price and an option for an additional period at a set price. Prior to February 28, 2030, the buyer exercises the rights to the additional services and additional years. Because the terms for the optional additional services and additional period were agreed upon and included in the January 1, 2025 contract, the additional services and additional period retain their status as nontaxable as determined as of the date of sale, which is January 1, 2025.

    (e) Example 3c. The parties from Example 3a effectuate a change order on December 1, 2025, contracting for additional data or information technology services not included in the January 1, 2025 contract. The change order adds $2,500,000 to the contract price and the payment of the $2,500,000 be based on additional milestones not included in the original contract. Although the installment payments made pursuant to the January 1, 2025 contract are not subject to the sales and use tax, the December 1, 2025 change order constitutes a new sale. The new sale is subject to the sales and use tax in effect on the date of sale, which is December 1, 2025. The vendor is required to collect the tax on milestone installment payments made for the services included in the change order.

    (f) Example 4. A contract for a subscription cloud storage service is initially entered into for a period from June 10, 2025 through July 9, 2025. Effective July 1, 2025, the cloud storage service becomes taxable. The subscription contract requires advance payments, gives the subscriber access to the service for a 1-month period, and is renewable thereafter on a monthly basis. Each subscription payment period is considered a separate lease, and thus a separate sale, for the purpose of determining when the tax is to be collected or paid. Because the cloud storage service is not subject to the sales and use tax as of June 10, 2025, no tax is due on the June 10, 2025 through July 9, 2025 subscription payment. Because the cloud storage service becomes subject to the sales and use tax on July 1, 2025, the tax is due on the July 10, 2025, through August 9, 2025, subscription payment and any subsequent monthly subscription payments for continued access.

#### Regulation .22 Exempt Charitable or Nonprofit Organizations.

*COMAR 03.06.01.22*

A. In this regulation, “food” has the meaning as defined in Tax-General Article, §11-206(a)(3)(i) and (ii), Annotated Code of Maryland.

B. Purchases by an Organization.

  (1) A purchase by a nonprofit charitable, educational, or religious organization or volunteer fire company or department, or volunteer ambulance company or rescue squad, located in this State, when the purchase is made to carry on the work of the organization, is exempt from the tax.

  (2) A purchase by a bona fide nationally organized and recognized organization of the veterans of the armed forces of the United States or an auxiliary of the organization or one of its units, is exempt from the tax.

  (3) A purchase to be used primarily for carrying on an “unrelated trade or business” as that term is defined in §513 of the Internal Revenue Code, or a purchase made by officials, members, or employees of the organization for their personal usage is not a purchase made to carry on the work of the organization within the meaning of this regulation. A purchase by the organization to be used for raising funds in activities which do not constitute an “unrelated trade or business” qualifies for the exemption.

  (4) A purchase of tangible personal property, a digital code, or a digital product by a nonprofit parent-teacher association located in the State is exempt from the tax if the association contributes the purchase to a public or nonprofit elementary or secondary school. A parent-teacher association may present the exemption number of its school to a vendor to claim the exemption.

  (5) Purchases of tangible personal property and taxable services are exempt if purchased by:

    (a) A cemetery company that holds a 501(c)(13) designation from the Internal Revenue Service;

    (b) A credit union organized under the laws of Maryland or the United States; or

    (c) A nonprofit organization that holds a 501(c)(4) designation from the Internal Revenue Service and provides a program to contain, clean up, or otherwise mitigate oil spills or other substances occurring in the United States coastal and tidal waters.

C. Sales by an Organization.

  (1) Generally, a sale of tangible personal property, a digital code, a digital product, or a taxable service by an exempt organization is subject to tax.

  (2) The following sales are not subject to the tax:

    (a) Sales made by a bona fide church or religious organization when made for the general purposes of the organization.

    (b) Sales made by a gift shop at a mental hospital that the Maryland Department of Health operates.

    (c) Sales made by an independent hospital thrift shop that is operated by all volunteer staff, sells only donated articles, contributes the profits from sales to the hospital with which the shop is associated, and is not operated in conjunction with a gift shop or other retail establishment.

    (d) Sales made by a vending facility operated under the Maryland Vending Program for the Blind and located on property held or acquired by or for the use of the United States for any military or naval purpose where a post exchange or other tax exempt concession is operated.

    (e) Sales of magazine subscriptions by an elementary or secondary school in the State, or a nonprofit parent-teacher organization or other nonprofit organization within the school, when the students act as salespersons or order takers, if the net proceeds from the sales are used solely for the educational benefit of the school or its students. Sales from an agreement or contract with an organization to participate in a fund-raising activity for a percentage of the gross receipts when students sell or take orders for magazines are also exempt.

    (f) Sales of food, the proceeds of which are used to support a bona fide nationally organized and recognized organization of veterans of the armed forces of the United States or auxiliary of the organization or one of its units, for consumption only on the premises, when served by the organization or auxiliary.

    (g) Sales of food, the proceeds of which are used to support a volunteer fire company or department or its auxiliary or a volunteer ambulance company or rescue squad or its auxiliary, when the food is served by the company, department, squad, or auxiliary.

    (h) Auction sales by or on behalf of a bona fide church, religious organization, or other qualified nonprofit organization, if the proceeds of the sale are used to carry on the exempt purposes of the church or organization. Unless the auction is held directly by a bona fide church or other religious organization, the exemption is limited to only that portion of the sale price that exceeds the fair market value of the tangible personal property, digital code, or digital product, and therefore qualifies for a deduction under the federal income tax as a charitable contribution under the regulations and guidelines of the Internal Revenue Service. In auctions held by an auctioneer or any person or organization other than a bona fide church or other religious organization, the exemption is subject to limitation. This exemption requires that the portion of the sale price that qualifies for a deduction under the federal income tax must be separately stated from the fair market value portion of the sales price. If the two components of the sale price are not separately stated, then the sale price is subject to the tax in its entirety.

    (i) Sales of food, bottled water, soft drinks or carbonated beverages, or candy by a nonprofit food vendor at a youth sporting event or 4-H youth event for individuals under the age of 18 years if there are no facilities for food consumption on the premises, unless the sale is within an enclosure for which a charge is made for admission.

D. Exemption Certificates.

  (1) The Comptroller will issue an exemption certificate upon approval of an application to:

    (a) A nonprofit charitable, educational, or religious organization that is:

      (i) Located in the State;

      (ii) Located in an adjacent jurisdiction and provides its services within the State on a routine and regular basis; or

      (iii) Located in an adjacent jurisdiction whose law does not impose a sales or use tax on a sale to a nonprofit organization made to carry on its works, or contains a reciprocal exemption from sales and use tax for sales to nonprofit organizations located in adjacent jurisdictions.

    (b) A volunteer fire company or department or a volunteer ambulance company or rescue squad located in the State; and

    (c) Other organizations entitled to exemptions on their purchases, such as governmental entities, bona fide nationally organized and recognized veterans’ organizations, and credit unions.

  (2) An organization wishing to claim an exemption to which it is entitled shall exhibit its exemption certificate to the vendor at the time of sale. The vendor shall record the valid serial number of the exemption certificate on any record or evidence of each sale. Unless the exemption certificate is exhibited at the time of sale, the applicable tax shall be charged by the vendor.

E. Form and Expiration of Exemption Certificates.

  (1) An exemption certificate contains the organization's name, address, eight-digit account number, and, except for governmental entities, specifies an expiration date. Except for governmental entities, certificates will expire on September 30, 2017, and, upon reissuance, at 5-year intervals after that. Upon application, the Comptroller will issue new exemption certificates to replace existing certificates of those organizations which continue to qualify for tax exempt status.

  (2) Designation of Categories. The first two digits of the eight-digit account number assigned to the organization by the Comptroller designate the category in which the organization is included, as follows:

    (a) 29 — religious institutions;

    (b) 30 — federal, state, and local governmental agencies;

    (c) 31 — educational and charitable organizations, qualified cemeteries, and qualified oil spill mitigation organizations;

    (d) 32 — credit unions;

    (e) 33 — volunteer fire departments, rescue squads, and ambulance companies; and

    (f) 34 — veterans' organizations.

  (3) Contractors purchasing materials to be incorporated into the real property of a nonprofit charitable, educational, or religious organization, a volunteer fire company or rescue squad, or a bona fide, nationally organized and recognized veterans' organization may use the exemption certificate issued to that organization to purchase the material tax-free. Purchase of material which will be incorporated into the real property of any other organization, including an otherwise exempt governmental entity, is subject to the tax.

  (4) A vendor may accept the exemption certificate number issued to a religious institution on a resale certificate instead of a sales and use tax license number. Other private exempt entities may not use their exemption certificate number to issue resale certificates but shall register as vendors and use their sales and use tax license numbers for this purpose.

  (5) A vendor may not exempt from the tax any sale to any entity on the basis of an exemption certificate which has expired. The tax shall be collected on sales to entities claiming exemption status unless the vendor is presented with an unexpired exemption certificate issued by the Comptroller to that organization.

#### Regulation .23 Room Rentals.

*COMAR 03.06.01.23*

A. A charge for a right to occupy a room or lodgings as a transient guest is subject to tax. The tax does not apply to charges to persons who rent living accommodations on a monthly basis or who are permanent residents. However, all rentals in resort areas for terms of 4 months or less are subject to the tax.

B. Any amount charged or retained by a vendor as a result of the cancellation of a room or lodging is subject to tax. The vendor shall allocate the amount charged or retained between taxable price and tax. This section does not apply to amounts charged or retained by a vendor for the rental of living accommodations to permanent residents or to persons on a monthly basis. This section does apply to amounts charged or retained by a vendor who rents accommodations in resort areas for terms of 4 months or less.

C. Receipts from the rental of banquet and other public rooms and business quarters are not subject to the tax.

D. The tax will apply on the rental of any sleeping room when used both for accommodations and for business purposes.

#### Regulation .24 Tangible Personal Property Consumed in a Production Activity.

*COMAR 03.06.01.24*

A. This regulation applies to sales on or before June 30, 2000.

A-1. The retail sale or use of tangible personal property that will be consumed directly and predominantly in a production activity, if consumed within 1 year after the property is first used in a production activity, is not subject to tax.

B. Consumed Test.

  (1) Tangible personal property is consumed if it is destroyed, used up, or worn out during production activities to the extent that it cannot be repaired, reconditioned, or rendered fit for further use in production activities.

  (2) Tangible personal property is not consumed because it becomes obsolete, or because the buyer has no further orders requiring its use, or because it is otherwise not needed or useless. Property is not consumed in production activities because it is changed as a result of preparing it for further use, even though its usefulness may be limited as a result of the changes. The changed property is consumed only if, as a result of its subsequent use in production activities, it satisfies the test described in §B(1) of this regulation.

C. Directly Test.

  (1) Tangible personal property is consumed directly in a production activity only if it is used during the production activity, at the location where the production activity occurs, and its use is integral and essential to that activity.

  (2) Tangible personal property is not consumed directly in a production activity simply because it is used at some point in a production process, as distinguished from the actual production activity, even if such use may be considered essential to a production activity, either by law or practical necessity. For example, tangible personal property that is consumed in producing items that are not sold, but are used in a production activity, is not consumed directly in that production activity, even though the items produced may be essential to production.

D. Predominantly Test. Tangible personal property is consumed predominantly in a production activity if it is used more than 50 percent of the time directly in a production activity.

E. The 1-year limitation within which tangible personal property shall be consumed begins to run when that property is first used in a production activity, and is not stayed if the property is temporarily withdrawn from use. Property that is not in fact consumed within 1 year does not satisfy this limitation, even if the buyer intended to consume, or would normally consume, the property within 1 year.

F. Payment of Tax.

  (1) The buyer need not pay the tax on the purchase or use of tangible personal property only if the buyer reasonably expects and in good faith intends to consume that property directly and predominantly in a production activity within 1 year from its first use, as those terms and conditions are defined and explained in this regulation. If, however, the property is actually used in such a way that it does not satisfy each of the tests set forth above, including the 1-year limitation, the tax applies to that property. At the time a buyer knows or should know that the tax applies to property on which no tax has been paid, the buyer shall report the price of that property as a taxable purchase or use on the return for that period. A buyer may claim a refund for taxes paid on any property that in fact satisfies all of the tests and limitations set forth above.

  (2) If a buyer is not required to pay the tax at the time of the purchase or use of property in accordance with §F(1), above, the buyer may claim the exclusion by providing the vendor with a resale certificate, on which a registration number is not required, stating the reason that tax is not payable. A buyer may also issue such a certificate if the buyer cannot determine how much of the property will not be subject to tax pursuant to this regulation, so long as the buyer reasonably expects that more than half the property will not be subject to tax.

#### Regulation .25 Transactions in Interstate Commerce.

*COMAR 03.06.01.25*

A. General. The tax does not apply to a transaction which is not within the taxing power of this State under the Constitution of the United States, as interpreted from time to time by applicable court decisions.

B. Tangible Personal Property Shipped From this State.

  (1) If tangible personal property is sold within this State, and possession is taken by the buyer within this State, the tax applies even if the tangible personal property is to be transported out of this State immediately upon delivery.

  (2) If tangible personal property is sold within this State and possession is taken by the buyer outside this State, the tax does not apply, if the property is not to be used in Maryland. Possession is taken by the buyer outside this State only if either of the following tests are met:

    (a) The seller is obligated to personally deliver the tangible personal property outside this State; or

    (b) The seller is, by terms of the sales contract, obligated to deliver the tangible personal property to a common carrier or to the mails for transportation outside this State.

  (3) If tangible personal property is sold within this State and possession is taken by the buyer outside this State, the tax applies if the property is to be brought into this State for use in this State. The duty of the vendor to collect the sales and use tax on a sale for use in the State is not affected by delivery of the property to the buyer at a point outside Maryland. If the vendor, exercising reasonable judgment, knows or should know that the buyer intends to bring the property into this State for use here, the vendor is obligated to collect the tax.

C. Tangible Personal Property Shipped into this State. In those cases in which tangible personal property is shipped into this State pursuant to a contract of sale, the sale will be considered to be made in this State if both of the following tests are met:

  (1) The contract of sale is entered into either conditionally or unconditionally in this State by or on account of a nonresident seller who has in this State a place of business from which sales are made or a sales office.

  (2) The delivery of the tangible personal property is made by the seller to the buyer in this State. Delivery of tangible personal property will be considered as made in this State if either:

    (a) Physical possession of the tangible personal property is transferred by the seller to the buyer in this State; or

    (b) The tangible personal property is shipped by the seller from a point outside this State to a buyer in this State either by common carrier or mail, whether the shipment is F.O.B. the seller's place of business or otherwise.

D. The tax applies to sales for use in this State regardless of whether the sale takes place in this State or outside this State.

E. Taxable Services.

  (1) The sale of a digital code, digital product, data or information technology service, a software publishing service, or a taxable service described in Tax-General Article, §11-101(m)(14) and (15), Annotated Code of Maryland is presumed to be made in the state in which the customer tax address is located.

  (2) If a seller located outside the State delivers a taxable service within the State, the tax applies if the seller is an out-of-state vendor under Regulation .33 of this chapter.

#### Regulation .26 Aircraft, Motor Vehicles, Railroad Rolling Stock, and Vessels Used in Interstate and Foreign Commerce.

*COMAR 03.06.01.26*

A. A sale or a sale for use of an aircraft, motor vehicle, railroad rolling stock, or vessel that is used principally in interstate or foreign commerce and a sale or a sale for use of a replacement part, other tangible personal property, or digital product to be used physically in, on, or by it, are exempt from the tax.

B. An aircraft, motor vehicle, railroad rolling stock, or vessel is used principally in interstate or foreign commerce if during the first year of its use, or if the use does not extend to 1 year, then during the lesser period of use, any one of the following tests is met:

  (1) More than 50 percent of the total mileage traveled is mileage between a pickup or delivery point in one state and a pickup or delivery point in another state or the District of Columbia (uninterrupted by intervening pickups or deliveries), between a pickup or delivery point within the United States and a pickup or delivery point outside the United States, or between pickup and delivery points wholly outside the United States. The mileage traveled directly between one pickup or delivery point to another pickup or delivery point within the same state or the District of Columbia is not qualifying mileage.

  (2) More than 50 percent of all trips between a pickup or delivery point and the next pickup or delivery point, are between a pickup or delivery point in one state and a pickup or delivery point in another state or the District of Columbia, between a pickup or delivery point within the United States and a pickup or delivery point outside the United States, or between pickup and delivery points wholly outside the United States. For the purposes of this test, each segment of a fixed or variable route between one pickup or delivery point and the next pickup or delivery point is a distinct trip, and trips wholly within one state or the District of Columbia are not qualifying trips.

  (3) More than 50 percent of the total days of use are days during which there has occurred or is occurring a trip between a pickup or delivery point in one state and a pickup or delivery point in another state including the District of Columbia, between a pickup or delivery point within the United States and pickup or delivery point outside the United States, or between pickup and delivery points wholly outside the United States. A day in which trips are made or are being made solely between pickup and delivery points within any one state or the District of Columbia is not a qualifying day.

C. Repealed.

D. If tax is not paid at the time of purchase or use of tangible personal property or digital product on the basis that one of the tests set forth in §B of this regulation will be met, but in fact none of these tests is met, the exemption does not apply. The tax shall be payable to the Comptroller from the buyer as of the date the buyer has reason to believe that the exemption does not apply.

E. Lease or Rental — Tax Exemption.

  (1) In the case of a lease or rental, entitlement to the exemption is determined on the basis of use during each billing period of the lease or rental.

  (2) If a lease or rental agreement extends over more than one billing period, and if the lessee reasonably believes that the exemption will apply in more than 50 percent of the billing periods covered by the lease or rental agreement, the lessee may:

    (a) Claim the exemption for all of the billing periods covered by the lease or rental agreement, and pay the tax on any lease or rental payment for any billing period for which the exemption does not apply; or

    (b) Claim no exemption for any of the billing periods covered by the lease or rental agreement, and file an application for refund of any taxes paid on any lease or rental payment for any billing period for which the exemption applies.

  (3) An exemption may not be claimed if a lessee does not reasonably believe that the exemption will apply in more than 50 percent of the billing periods covered by the lease or rental agreement, but a lessee may file an application for refund of any taxes paid on any lease or rental payment for any billing period for which the exemption applies.

F. Statement For Tax Exemption.

  (1) A vendor may overcome the presumption of taxability by requiring of the buyer and retaining with the records of the transaction, a statement signed by the buyer in substantially the following form:

  (2) A vendor may also accept a signed statement covering a number of specified transactions or all transactions with a particular buyer, subject to notification to the contrary.

#### Regulation .27 Auctioneers, Agents, Brokers and Factors.

*COMAR 03.06.01.27*

Every factor, auctioneer, broker, or agent acting for any principal, or entrusted with possession of any bill of lading, custom house permit, or warehouse receipt for delivery of any tangible personal property or entrusted with possession of any personal property for the purpose of sale shall be responsible for the proper collection and remittance of the tax with respect to these sales, regardless of the fact that the principal or owner of the property being sold would not have been liable for collection of the tax if they had made the sale themselves.

#### Regulation .28 Lease of Tangible Personal Property, Digital Codes, Digital Products, Data or Information Technology Services, and Software Publishing Services.

*COMAR 03.06.01.28*

A. In this regulation, “lease” means:

  (1) The transfer of possession, absolutely or conditionally by any means, of tangible personal property, digital codes, or digital products for a consideration, by way of lease, rental, royalty agreement, or grant of a license for use; and

  (2) A license for use of a data or information technology service or a software publishing service as defined in Regulation .48 of this chapter.

B. “Lease” is included within the statutory definition of the term “sale” and is thus subject to the tax in the absence of a specific exemption or exclusion.

C. Each lease payment period is considered a separate lease, and thus a separate sale, for the purpose of determining when the tax is to be collected or paid.

D. The tax applies to the entire lease payment if property acquired by lease is within this State at any time during that lease payment period, regardless of where the lease was transacted or possession of the property taken.

E. The tax applies to the entire lease payment if the property, digital code, digital product, or taxable service acquired by lease is used within the State at any time during that lease payment period regardless of where the lease was transacted or possession of the property, the digital code, or the digital product was taken, or where the taxable service was delivered.

F. A transaction involving the utilization of equipment with an operator supplied by the owner is a lease if control over the utilization of the equipment passes to the customer, but is not a lease if the transaction is for the performance of a specific job in a manner to be determined by the owner or his operator. In this transaction, the burden is on the parties to establish that no lease occurred. When the billing for this transaction is on a time basis, it is presumed that control passed for the time indicated and that the transaction is a lease. This presumption may be rebutted only by clear and convincing evidence, such as a written contract, that at the time the transaction was entered into each party contemplated that the agreement was for the completion of a specific job rather than for the provision of a particular piece of equipment with an operator for a particular purpose for as long as necessary. The fact that the owner issued a resale certificate to buy the equipment tax free is evidence that a subsequent transaction involving that equipment is a lease.

G. Service Charges.

  (1) In this section, “nontaxable service” means any service other than a taxable service as defined in Tax-General Article, §11-101(m), Annotated Code of Maryland.

  (2) The tax applies to the entire lease payment if a charge for lease or rental of tangible personal property or digital products includes a charge for a nontaxable service, whether the charge for a nontaxable service is separately stated or not, if the dominant purpose of the transaction is to obtain the tangible personal property or digital product and the nontaxable service is a mandatory charge imposed by the vendor as a condition of renting the item or is incidental and is not the dominant purpose of the transaction. For example, a charge for the lease of a portable toilet that includes a mandatory charge for cleaning is subject to the tax whether the cleaning charge is separately stated or not. The dominant purpose of the lease of the toilet is to provide a specific item of tangible personal property and not to provide cleaning or servicing of the toilet. Separately stated charges for the nontaxable services enumerated in §H(2) of this regulation are excluded from taxable price.

  (3) The tax does not apply to a charge for a nontaxable service that includes a charge for lease or rental of tangible personal property or digital product, whether the charge for the tangible personal property or digital product is separately stated or not, or whether the charge is mandatory or not, if the dominant purpose of the transaction is to obtain a nontaxable service, and the provision of the tangible personal property or digital product is incidental to the nontaxable service. For example, a charge for trash removal service where a trash receptacle is provided in conjunction with the trash removal service is not a taxable lease of tangible personal property. The dominant purpose of the lease is to remove trash from a premise and not to lease a trash receptacle.

  (4) The tax applies to the entire lease payment if a charge for a lease of a taxable service includes a charge for a nontaxable service if the charge for the nontaxable service is not separately stated, if the dominant purpose of the transaction is to obtain the taxable service, and the nontaxable service is a mandatory charge imposed by the vendor as a condition of, or incidental to, receiving the taxable service and not the dominant purpose of the transaction. For example, a vendor charges a software developer for publishing a non-custom software application, which is a taxable software publishing service, and includes a charge for customer support, which is a nontaxable service. The dominant purpose for the lease of the software publishing service is to provide the software to end users, not to provide customer support. The entire lease payment is subject to the sales and use tax if the charge for customer support is not separately stated.

  (5) The tax does not apply to a charge for a lease of a nontaxable service that includes a charge for a lease of a taxable service that is not separately stated, if the dominant purpose of the transaction is to obtain the nontaxable service, and the provision of the taxable service is incidental to the nontaxable service.

H. Computation of Tax.

  (1) The tax applies to the value in money of the consideration of any kind required to be paid to the lessor under the terms of the lease, except as provided in §G(3) of this regulation. Included in the taxable price are charges for required maintenance or required insurance agreements, reimbursement for registration fees, taxes, and other expenses of the owner, passed on to the lessee, and all charges for an operator of leased equipment including waiting time, overtime, guaranteed time, travel time, and holiday pay.

  (2) The following charges, if separately stated and identified, are not a part of the taxable price:

    (a) Installation charges;

    (b) Charges for professional services, unless the services are taxable services;

    (c) Late payment charges, but not any charges included in a timely payment even though computed in a manner similar to the computation of interest or finance charges;

    (d) Delivery charges, including charges for an operator to get the item to the lessee at the beginning of the lease and to return the item to the owner at the expiration of the lease;

    (e) Charges for an amount directly attributable to any personal property tax on the leased property if the lease is noncancellable except for cause and is for a period exceeding 1 year.

I. Except as provided in Regulation .49 of this chapter, a person who buys tangible personal property, a digital code, a digital product, or a taxable service for the dual purpose of leasing it to others and also for personal use, or who buys tangible personal property, a digital code, a digital product, or a taxable service with the sole intention of leasing it but in fact also employs the property or digital product for personal purposes, shall pay the tax on the purchase price and shall also collect the tax on all leases. The fact that the buyer may simultaneously or subsequently offer this property or digital product for outright sale does not create an exemption for the original purchase.

#### Regulation .29 Ice.

*COMAR 03.06.01.29*

In general, ice, including ice for household consumption, is not food for sales and use tax purposes. If, however, ice is sold as a component of food, such as in a beverage other than an alcoholic beverage, the provisions of the law concerning the sale of food shall apply. In all other instances, the sale of ice, including the sale of ice sculptures, is subject to taxation to the same extent as other tangible personal property. For example, if ice is used for packing a commodity during shipment, and title to the ice will pass to the buyer along with the commodity, the packer may issue a resale certificate for the ice. If, however, only the commodity and not the ice will be transferred, the purchase of the ice is taxable.

#### Regulation .30 Fabrication or Production.

*COMAR 03.06.01.30*

A. The tax shall be charged on the full selling price for the production or fabrication of tangible personal property or a digital product on a special order for a consideration. This is true even though charges for labor are segregated from the cost of the materials.

B. Production of a New Item.

  (1) Whenever any new item is being produced the tax shall be collected on the full selling price as, for example, a manufacturer orders a repair part for machinery from a machine-shop—the tax shall be collected on the full selling price of the part including labor.

  (2) This regulation applies with equal force to those situations where the materials are furnished by the customer and the fabrication consists wholly of labor as for example, a steel fabricator or machine shop rolling, bending, cutting, boring or punching holes, painting, or performing other services on materials furnished by the customer, if this labor is used in producing a new item. Some other examples are a tailor making a suit from materials furnished by his customers and the making of drapes or slipcovers from materials furnished by the customer.

C. New Item.

  (1) “New Item” means new insofar as the ultimate purchaser is concerned. The fact that work is performed by several different persons before the item is ready for use by the ultimate purchaser does not mean that the item is not a new item. Thus, all charges for bringing the item to its finished state are subject to the tax. Likewise, the cost of repairing, remodeling, or reconditioning an item is subject to the tax if a new or different item from the original is produced by these services.

  (2) The creation of a new item includes the assembly of a piece of property for the first time, on the job site or elsewhere, but not the re- assembly of a piece of property which has been fully assembled previously, disassembled for shipping convenience, and then reassembled.

D. Installation.

  (1) The installation of units for tangible personal property, each of which constitutes a complete, separable, and functioning unit at the job site, will not be considered fabrication. Any process which involves the assembly of raw materials, components, subassemblies or parts into a functioning industrial unit or the creation or assembling of workable support systems such as piping systems, electrical systems, material moving systems, etc. will be considered fabrication and subject to the tax.

  (2) The test to be applied is the following:

    (a) If the labor is expended in producing a new or different item, it is subject to the tax;

    (b) If the labor is expended in repairing or altering existing property belonging to another to restore the item to its original condition or usefulness, the tax does not apply to the labor pursuant to Regulation .03 of this chapter.

#### Regulation .31 Direct Payment Permits.

*COMAR 03.06.01.31*

A. General Provisions.

  (1) Authority to Issue a Direct Payment Permit.

    (a) Except as provided in §A(1)(c) of this regulation, the Comptroller may not grant the authority to make direct payment, to the Comptroller, of sales and use tax due on purchases by a vendor or issue permits evidencing this authority.

    (b) Notwithstanding the provisions of §A(1)(a) of this regulation, the Comptroller may continue to administer direct payment permits issued to vendors before July 1, 1993.

    (c) On or after July 1, 2002, the Comptroller may issue a direct payment permit to a licensed vendor with which the Comptroller has entered into an effective rate agreement.

  (2) A person to whom a Direct Payment Permit has been issued by the Comptroller may not be required to pay vendors the sales and use tax, as long as the permit remains valid, but instead shall make direct payments to the Comptroller of any sales and use tax due. Holders of Direct Payment Permits shall be required to file tax reports and make payments of all taxes due on or before the twentieth day of the month succeeding that month in which the obligation for the tax was incurred. Sales and use tax shall become due when the property or service bought is actually placed in service, or when the utilization becomes known, whichever occurs first. If determination of taxability is not made within 1 year from the receipt of goods or services by the permit holder, then those goods and services shall be deemed taxable. The permit holder shall be required to make proper determination of the tax due and keep appropriate records of that determination.

  (3) Holders of Direct Payment Permits shall notify their vendors that they hold this permit and may furnish to each vendor a photocopy or electronic copy of that permit. In making purchases the permit holder shall furnish to vendors a certificate of exemption bearing the holder's Direct Payment Permit number.

  (4) Vendors who make sales to holders of Direct Payment Permits shall maintain records of the amount and description of each sale and the identity of the permit holder. A vendor, upon notice of revocation or discontinuance of the holder's Direct Payment Permit, shall collect sales and use tax on all purchases from the date of notice.

B. Repealed.

C. Revocations of Direct Payment Permit.

  (1) The Comptroller may revoke a Direct Payment Permit at any time for failure of the holder to comply with the conditions under which the permit was granted, or for any other reasons constituting misuse of the permit, or for any other good cause.

  (2) A direct payment permit issued in conjunction with an effective rate agreement shall be revoked when an effective rate agreement is no longer in effect.

  (3) Within 30 days after receipt by the permit holder of notice of revocation by the Comptroller or at least 30 days before unilateral discontinuance of direct payment authority, the holder shall give notice to each supplier of the termination of the Direct Payment authority and return the Direct Payment Permit Certificate to the Comptroller.

D. Exemption Certificate for Use in Connection with Direct Payment Permits. The certificate of exemption to be furnished by the holder to vendors in making purchases shall bear the Direct Payment Permit number.

#### Regulation .32 Repealed.

*COMAR 03.06.01.32*

#### Regulation .32-1 Repealed.

*COMAR 03.06.01.32-1*

#### Regulation .32-2 Tangible Personal Property Used in a Production Activity.

*COMAR 03.06.01.32-2*

A. This regulation applies to sales and purchases on or after July 1, 2000.

B. In this regulation, the following terms have the meanings indicated:

  (1) Production Activity.

    (a) “Production activity” means:

      (i) Assembling, manufacturing, processing, or refining tangible personal property for sale or resale, except for processing food or beverages by a food vendor;

      (ii) Generating electricity for sale or for use in another production activity;

      (iii) Laundering, maintaining, or preparing textile products for rental;

      (iv) Producing or repairing production machinery or equipment;

      (v) Establishing or maintaining clean rooms or clean zones as required by applicable provisions of the federal Food, Drug and Cosmetic Act, the Public Health Service Act, and the Virus-Serum-Toxin Act, and the regulations adopted thereunder, pertaining to the manufacture of drugs, medical devices, or biologics;

      (vi) Providing for the safety of employees; or

      (vii) Providing for quality control.

    (b) “Production activity” does not include:

      (i) Servicing or repairing tangible personal property, except servicing or repairing production machinery or equipment;

      (ii) Maintaining tangible personal property, except textile products for rental and production machinery and equipment;

      (iii) Providing for the comfort or health of employees; and

      (iv) Storing the finished product.

  (2) “Used directly and predominantly in a production activity” means the:

    (a) Use of the property is integral and essential to the production activity, occurs where the production activity is carried on, and occurs during the production activity; and

    (b) Property used both in production activities and administrative, managerial, sales, or any other operational or nonoperational activities is used more than 50 percent of the time directly in production activities.

C. Applicability of the Sales and Use Tax. The sales and use tax does not apply to a sale or lease of:

  (1) Tangible personal property, a digital code, or a digital product used directly and predominantly in a production activity at any stage of operation on the production activity site, from the handling of raw material or components to the movement of finished product, if the tangible personal property, digital code, or digital product is not installed so that it becomes real property;

  (2) A melting, smelting, heating, or annealing coke oven, aluminum furnace, anode bake oven, electrolytic pot, cathode, refractory, or other material used in relining and rebuilding a furnace or oven;

  (3) A foundation to support production machinery or equipment or an item required to conform to air or water pollution laws and normally considered part of real property;

  (4) Machinery and equipment used to produce bituminous concrete or electricity, fuel, and other utilities used to operate that machinery and equipment; or

  (5) Equipment used by a retail food vendor to manufacture or process bread or bakery goods for resale if the:

    (a) Taxable price of each piece of equipment is at least $2,000; and

    (b) Retail food vendor operates a substantial grocery or market business, as defined in Tax-General Article, §11-206(a), Annotated Code of Maryland, at the same location where the food is sold.

D. Examples of Exempt Personal Property.

  (1) Exempt tangible personal property used in providing for the safety of employees includes only tangible personal property worn on or carried by the person engaged in the production activity, such as:

    (a) Safety glasses;

    (b) Hard hats;

    (c) Safety gloves;

    (d) Breathing apparatus;

    (e) Lab coats; or

    (f) Safety shoes.

  (2) Exempt tangible personal property used in providing for quality control includes items used for raw material testing and end product testing, such as:

    (a) Gauges;

    (b) Scales;

    (c) Petri dishes;

    (d) Test tubes;

    (e) Spectrometers; and

    (f) Certain computers and software.

  (3) Exempt tangible personal property used to move finished goods on a production activity site includes equipment used to move goods into and out of storage, including:

    (a) Forklifts;

    (b) Cranes;

    (c) End product conveyor belts; and

    (d) Inventory control systems and related software.

  (4) Exempt tangible personal property used to maintain production machinery and equipment includes:

    (a) Autoclaves and sterilizers;

    (b) Pressure washers;

    (c) Cleaning fluids; and

    (d) Vacuum systems.

E. Storage equipment, including shelving and storage racks, is subject to tax.

F. Tangible personal property used to provide for the health and comfort of employees, such as antibacterial detergents and soaps, and ventilation and cooling equipment, is not exempt from sales tax.

G. Payment of Tax.

  (1) All sales are presumed subject to the tax. The burden of proving that the exemption applies is on the vendor and buyer. A vendor may overcome the presumption by requiring the buyer to produce a signed statement in substantially the following form and retaining that form with the record of sale:

  (2) The buyer need not pay the tax on the purchase or use of tangible personal property only if the buyer reasonably expects and in good faith intends to use that property directly and predominantly in a production activity. If, however, the property is used in a way that does not meet the directly and predominantly test, the tax applies to that property. At the time the buyer knows or should know that the tax applies to property on which no tax has been paid, the buyer shall report the price of the property as a taxable purchase for use on the return for that period. The buyer may claim a refund for taxes paid on property that in fact satisfies all the tests and limitations of this regulation.

#### Regulation .33 Out-of-State Vendor.

*COMAR 03.06.01.33*

A. A person who engages in the business of an out-of-State vendor shall collect and remit sales and use tax on all taxable sales for use in the State.

B. 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, a digital code, a digital product, 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, a digital code, a digital product, or a taxable service;

  (3) Enters the State on a regular basis to provide service or repair for tangible personal property, digital code, or digital product either directly or indirectly through an agent, independent contractor, or subsidiary;

  (4) Regularly uses the person’s vehicles to sell or deliver tangible personal property, digital codes, digital products or a taxable service for use in the State; or

  (5) Sells tangible personal property, digital codes, digital products, 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:

    (a) The person’s gross revenue from the sale of tangible personal property, digital codes, digital products, or taxable services delivered in the State exceeds $100,000; or

    (b) The person sold tangible personal property, digital codes, digital products, or taxable services for delivery into the State in 200 or more separate transactions.

C. The requirements of §B(5) of this regulation shall be effective beginning October 1, 2018.

#### Regulation .34 Special Use Tax on Certain Electricity.

*COMAR 03.06.01.34*

A. Definitions.

  (1) In this regulation, the following terms have the meanings indicated.

  (2) Terms Defined.

    (a) “On site generated electricity” has the meaning stated in Tax-General Article, §11-1A-01(b)(1), Annotated Code of Maryland.

    (b) “Owner” has the meaning stated in Tax-General Article, §11-1A-01(c), Annotated Code of Maryland.

    (c) “Public service company” has the meaning stated in Tax-General Article, §8-401(f), Annotated Code of Maryland.

    (d) “Substantially the same ownership” means that identical persons or governmental entities are the owners of a facility that generates electricity and a building or machinery and equipment that consumes the electricity and their ownership interest in each varies by 10 percent or less.

B. The special use tax on electricity applies to the use in this State of electricity not delivered by a public service company and which is generated by a facility:

  (1) The owner of which, together with any tenants of the owner, does not consume at least 80 percent of the electricity generated by the facility each year;

  (2) That is not operated by the owner or a designee of the owner; or

  (3) Owned by more than one person or governmental entity where the ownership of the facility and the ownership of the building or machinery and equipment that consumes the electricity are not substantially the same ownership.

C. The special use tax on electricity does not apply to:

  (1) Electricity used for residential purposes;

  (2) Electricity used exclusively for emergency back-up generation; and

  (3) On-site generated electricity.

D. The provisions of Tax-General Article, Title 11, Subtitles 3, 4, 5, 6, and 7, Annotated Code of Maryland, regarding tax computation and statement, tax collection, returns and records, tax payment, and licensing apply to the special use tax on electricity.

E. In addition to the information required under Tax-General Article, Title 11, Subtitle 5, the returns of a vendor or buyer of electricity that is subject to the special use tax on electricity shall state for the period that the return covers the:

  (1) Kilowatt hours of electricity that are subject to the special use tax on electricity; and

  (2) Special use tax on electricity that is due.

F. The rate of the special use tax on electricity is 0.062 cents for each kilowatt hour of electricity that is subject to the tax.

G. The special use tax is in addition to any other sales and use tax due on the sale of the electricity.

H. The provisions of the Tax-General Article, Title 13, Annotated Code of Maryland, which apply to sales and use taxes, apply to the special use tax on electricity.

#### Regulation .35 Property and Services Used in a Film Production Activity.

*COMAR 03.06.01.35*

A. Definitions. In this regulation, the following terms have the meanings indicated:

  (1) “Certified film producer or film production company” means a film producer or film production company that has received a Certificate of Eligibility for Film Production Sales and Use Tax Exemption from the Maryland Film Office of the Maryland Department of Commerce.

  (2) Film Production Activity.

    (a) “Film production activity” means the production or post-production of film or video projects including feature films, television projects, commercials, corporate films, infomercials, music videos, or other projects for which the producer or production company will be compensated, and which are intended for nationwide commercial distribution.

    (b) “Film production activity” includes the production or postproduction of digital, animation, and multimedia projects.

    (c) “Film production activity” does not include:

      (i) Production or postproduction of student films or noncommercial personal videos;

      (ii) Any activity not necessary to, and not undertaken directly and exclusively for, the making of a master film, tape, or image; or

      (iii) Production or postproduction of projects the sale, display, exhibition, distribution, advertising, receipt, or possession of which, in the State, would violate the provisions of any State or federal law, including but not limited to Criminal Law Article, Title 11, Subtitles 1 and 2, Annotated Code of Maryland.

  (3) Nationwide Commercial Distribution.

    (a) “Nationwide commercial distribution” means intended for commercial distribution extending primarily beyond Maryland's local or regional (Maryland, Virginia, and the District of Columbia) market.

    (b) “Nationwide commercial distribution” does not include:

      (i) Distribution primarily via Internet transmission; or

      (ii) Live coverage of an event, including but not limited to news, sporting events, and concerts.

  (4) “Short term vehicle rentals” means a rental of a motor vehicle, as defined in Transportation Article, §11-135, Annotated Code of Maryland, for a period not to exceed 180 days.

B. The following tangible personal property or digital products, or a digital code to purchase the following, when sold to a certified film producer or film production company and used directly in connection with a film production activity, are exempt from sales and use tax:

  (1) Camera equipment, supplies, and accessories;

  (2) Motion picture film and tape stock;

  (3) Digital discs and masters;

  (4) Production facilities, including sound stage;

  (5) Lighting equipment and supplies, including bulbs and lamps;

  (6) Stage equipment and supplies;

  (7) Cranes, booms, dollies, and jibs;

  (8) Electric stands, cables, and wires;

  (9) Generators used to operate tax exempt lighting and stage equipment;

  (10) Time code equipment;

  (11) VTR and digital editing equipment;

  (12) Switchers;

  (13) Character generators;

  (14) Sound equipment and supplies;

  (15) Costumes, wardrobes, and materials to construct them, including shoes and hairpieces;

  (16) Make-up;

  (17) Props, including materials and equipment to construct them;

  (18) Scenery, including materials and equipment to construct it;

  (19) Design supplies and equipment;

  (20) Heating and air conditioning equipment not part of the realty and used on the set;

  (21) Drafting and art supplies and equipment;

  (22) Special effects supplies and equipment;

  (23) Photographic film;

  (24) Animation supplies and equipment;

  (25) Computer graphics and images;

  (26) Video and sound recording equipment;

  (27) Equipment and supplies for dubbing, mixing, editing, and cutting;

  (28) Short-term vehicle rentals; and

  (29) Separately stated charges for parts used to repair tax-exempt machinery and equipment.

C. The following are examples of tangible personal property not eligible for the film production exemption set forth in Tax-General Article, §11-227(b), Annotated Code of Maryland:

  (1) Office supplies and furniture;

  (2) Bottled water;

  (3) Catering of food and beverages;

  (4) Crew uniforms;

  (5) Flowers and plants used off-set;

  (6) Personal gifts;

  (7) Utilities;

  (8) Cell phones, pagers, and battery chargers;

  (9) Hotel rooms and lodging; and

  (10) Shipping cases and packaging materials.

D. The following services, when sold to a certified film producer or film production company and used directly in connection with a film production activity, are exempt from sales tax:

  (1) Editing (film, digital or tape);

  (2) Film processing;

  (3) Transfers of film to tape or digital format;

  (4) Foley services;

  (5) Multi-image services;

  (6) Sound mixing;

  (7) Voice-overs;

  (8) ADR/looping and sound sweetening;

  (9) Animation and special effects services;

  (10) Computer graphics services;

  (11) Photography on set; and

  (12) Fabrication, printing, or production of scripts, storyboards, costumes, wardrobes, props, scenery, or special effects.

E. The following are examples of services not eligible for the film production exemption set forth in Tax-General Article, §11-226(b), Annotated Code of Maryland:

  (1) Catering services;

  (2) Bodyguard or security services;

  (3) Cleaning services;

  (4) Telephone answering services; and

  (5) Mobile telecommunications services.

F. The duty of a vendor to collect the sales and use tax from a buyer is waived if the buyer provides the vendor with a properly executed Buyer Certification—Film Production Sales and Use Tax Exemption, Form No. COT/ST 131, which includes the Department of Commerce Certificate Number and Certificate expiration date.

G. For each film project, before a sale is consummated, the vendor shall have on file at least one completed Buyer Certification—Film Production Sales and Use Tax Exemption, Form No. COT/ST 131, to support the transactions for which the film production exemption is sought.

#### Regulation .36 Signs.

*COMAR 03.06.01.36*

A. Definitions.

  (1) In this regulation, the following terms have the meanings indicated.

  (2) Terms Defined.

    (a) “Banners” means signs made of cloth.

    (b) “Billboard signs” means freestanding advertising signs alongside a road installed by direct burial or anchor bolted to a concrete base.

    (c) “Freestanding signs” means advertising, identifying, or directional signs made of pylons or other material installed by direct burial or anchor bolted to a concrete base.

    (d) “Hanging signs” means signs hanging from the interior or exterior of a building.

    (e) “Portable signs” means signs which can be moved from place to place, including signs equipped with stands or legs.

    (f) “Posters” means signs made of paper or cardboard.

    (g) “Signs affixed to a building” means advertising, identifying, or directional signs affixed to exterior or interior walls of a building by means of nails, screws, brackets, glue, or two-sided tape, including neon channel letter signs, box-type electric signs, and pin-mounted dimensional letter signs.

B. Except as provided in §E of this regulation, the sale of a sign is considered to be the sale of tangible personal property subject to sales and use tax. The following are examples of signs which, when installed, are considered to be sales of tangible personal property:

  (1) Billboard signs;

  (2) Freestanding signs;

  (3) Signs affixed to a building;

  (4) Hanging signs;

  (5) Portable signs;

  (6) Posters; and

  (7) Banners.

C. The vendor of a sign considered to be tangible personal property shall collect sales and use tax on the price charged for the sign, including any charges for fabrication labor to make the sign. Separately stated installation charges are not subject to the sales and use tax. Charges for installation of signs at the job site are not considered charges for fabrication and are not subject to the tax. See Regulation .30 of this chapter regarding fabrication and installation.

D. A sign vendor may purchase materials that become incorporated into the sign without paying sales and use tax by issuing the supplier a valid Maryland sales and use tax resale certificate.

E. Signs or plaques embedded into a wall or floor of a building with the intent to be permanent and which cannot be removed are considered improvements to real property. Street or traffic signs installed for governmental entities are considered to be permanently installed and improvements to real property. Sales and use tax may not be collected on the sale of these installed signs. The installer of the sign shall pay the sales and use tax on the purchases of materials used to make the signs.

F. The application of vinyl letters, decals, or paint to a door, building, or vehicle to produce a sign is a non-taxable service. However, all materials and tools used to provide these services are taxable to the provider of the service upon purchase.

G. Lump sum charges for the maintenance and repair of signs are not subject to sales and use tax. If charges for the maintenance and repair are lump sum billed, the repairer shall pay the sales and use tax on all materials used to repair the sign. If charges for labor and materials are separately stated for repair of signs that are considered tangible personal property, the repairer shall collect the sales and use tax on all charges for materials and does not pay the tax on materials used to repair the sign. The repairer is responsible for paying the tax on all materials that are used to repair signs that are considered to be real property.

H. A sign that is shipped or installed, or both, outside the State is not subject to Maryland sales and use tax if it is considered a sale of tangible personal property. Sign materials or fabrication labor, or both, purchased in Maryland for signs installed as real property outside the State are subject to Maryland sales and use tax unless the purchase of the sign materials and fabrication labor would be exempt in the jurisdiction in which the sign is installed.

I. The sale of poles upon which signs are attached and foundations for the poles are considered sales of tangible personal property and are subject to the sales and use tax when the sign itself is considered tangible personal property.

#### Regulation .37 Tax Free Week for Qualifying Clothing and Footwear Items.

*COMAR 03.06.01.37*

A. Definitions.

  (1) In this regulation, the following terms have the meaning indicated.

  (2) Terms Defined.

    (a) “Accessory items” includes jewelry, watches, watchbands, handbags, handkerchiefs, umbrellas, scarves, ties, headbands, and belt buckles.

    (b) “Clothing or footwear” means an article of wearing apparel designed to be worn on or about the human body.

B. Exempt Sales.

  (1) The sales and use tax is not due on the sale of an article of clothing or footwear, excluding accessory items, if:

    (a) The taxable price of the article is $100 or less; and

    (b) The sale takes place during the 7-day period beginning at 12:01 a.m. on the second Sunday in August and continuing through 12 midnight the following Saturday.

  (2) The exemption applies to the taxable price of each article of clothing or footwear selling for $100 or less, regardless of how many items are sold on the same invoice to a customer. For example, if a customer purchases two shirts for $80 each, both items qualify for the exemption, even though the customer's total purchase price ($160) exceeds $100.

  (3) The exemption does not apply to the first $100 of an article of clothing or footwear selling for more than $100. For example, if a customer purchases a pair of pants costing $110, sales tax is due on the entire $110.

C. Taxable Sales. The exemption set forth in this regulation does not apply to:

  (1) Any special clothing or footwear that is primarily designed for protective use and that is not normally worn except when used for the protective use for which it is designed (For example, football pads are primarily designed for protective use and are not normally worn except when used for those purposes and do not qualify for the exemption.);

  (2) Accessory items;

  (3) Taxable services performed on the clothing or footwear, such as alterations (For example, sales tax is due on alteration to clothing, even though the alterations may be sold, invoiced, and paid for at the same time as the clothing being altered. If a customer purchases a pair of pants for $90 and pays $15 to have the pants cuffed, the $90 charge for the pants is exempt, but tax is due on the $15 alterations charge.); and

  (4) Purchases of items used to make or repair clothing or footwear, including fabric, thread, yarn, buttons, snaps, hooks, and zippers.

D. Articles Normally Sold as a Unit. Articles that are normally sold as a unit must continue to be sold in that manner. They cannot be priced separately and sold as individual items in order to qualify for the exemption. For example, if a pair of shoes sells for $150, the pair cannot be split in order to sell each shoe for $75 to qualify for the exemption. If a suit is normally priced at $225 on a single price tag, the suit cannot be split into separate articles so that any of the components may be sold for $100 or less in order to qualify for the exemption. However, components that are normally priced as separate articles may continue to be sold as separate articles and qualify for the exemption if the price of any article is $100 or less.

E. Sales of Sets Containing Both Exempt and Taxable Items.

  (1) When exempt clothing or footwear is sold together with taxable merchandise as a set or single unit, the full price is subject to sales tax unless the price of the exempt clothing or footwear is separately stated. For example, if a boxed gift consisting of a shirt and tie is sold for a single price of $80, the full price of the boxed gift set is taxable because the tie is taxable and the sale price of the shirt is not separately stated.

  (2) When exempt clothing is sold in a set that also contains taxable merchandise as a free gift, and no additional charge is made for the gift, the exempt clothing may qualify for this exemption. For example, a boxed set may contain a shirt and a free handkerchief. If the price of the set is the same as the price of the shirt sold separately, the item being sold is the shirt, which is exempt from tax if sold for $100 or less during the exemption period.

F. Discounts and Coupons.

  (1) A retailer may offer discounts to reduce the sales price of an item. If the discount reduces the sales price of an item to $100 or less, the item may qualify for the exemption. For example, a customer buys a $150 dress and a $110 blouse from a retailer offering a 10 percent discount. After applying the 10 percent discount, the final sales price of the dress is $135, and the blouse is $99. The dress is taxable because the price is more than $100, and the blouse is exempt because the price is less than $100.

  (2) When coupons are accepted by retailers as a part of the selling price of a taxable item, the value of the coupon is excludable from the tax as a cash discount, unless the retailer is reimbursed by a third party for the amount represented by the coupon. For example, if a customer purchases a pair of shoes priced at $110 with a retailer's coupon worth $10 off, the final sales price of the shoes is $100, and the shoes qualify for the exemption. If a customer purchases a pair of shoes priced at $110 with a manufacturer's coupon worth $10 off, the consideration paid for the pair of shoes totals $110 and the shoes do not qualify for the exemption.

G. Buy One, Get One Free or for a Reduced Price.

  (1) The total price of items advertised as “buy one, get one free” or “buy one, get one for a reduced price” cannot be averaged in order for both items to qualify for the exemption. The application of the exemption depends on the actual price paid for the item. The examples in §G (2) and (3) of this regulation illustrate how these sales shall be handled.

  (2) A retailer advertises pants as “buy one, get one free.” The first pair of pants is priced at $120 and the second pair is free. The tax is due on the $120. Having advertised that the second pair is free, the store cannot ring up each pair of pants for $60 in order for the items to qualify for the exemption. However, if the retailer advertises and sells the pants for 50 percent off, selling each pair of $120 pants for $60, each pair of pants qualifies for the exemption.

  (3) A retailer advertises shoes as “buy one at the regular price, get a second pair for half price.”  The first pair of shoes is sold for $110 and the second pair is sold for $55. Tax is due on the pair of shoes, but not on the $55 pair. Having advertised that the second pair is half price, the store cannot ring up each pair of shoes for $75 in order for the items to qualify for the exemption. However, if the retailer advertises the shoes for 25 percent off, thereby selling each pair of $110 shoes for $82.50, each pair of shoes qualifies for the exemption.

H. Rebates. Rebates occur after the sale and do not affect the sales price of an item purchased for purposes of the application of the exemption. For example, a customer purchases a sweater for $110 and receives a $12 rebate from the manufacturer. The retailer shall collect tax on the $110 sale price of the sweater.

I. Layaway Sales. A layaway sale is a transaction in which merchandise is set aside for future delivery to a customer who makes a deposit, agrees to pay the balance of the purchase price over a period of time, and, at the end of the payment period, receives the merchandise. Under Maryland law, the sale is made when the layaway agreement is entered into. Therefore, if the sale is entered into during the exemption period, the sale of eligible clothing may qualify for the exemption.

J. Rain Checks. Eligible items purchased during the exemption period using a rain check qualify for the exemption regardless of when the rain check was issued. However, issuance of a rain check during the exemption period does not qualify an eligible item for the exemption if the item is actually purchased after the exemption period.

K. Exchanges.

  (1) If a customer purchases an item of eligible clothing or footwear during the exemption period and later exchanges the item for the same item (different size, different color, etc.), additional tax is not due even if the exchange is made after the exemption period.

  (2) If a customer purchases an item of eligible clothing or footwear during the exemption period and, after the exemption period has ended, returns the item and receives credit on the purchase of a different item, the appropriate sales tax applies to the sale of the newly purchased item.

  (3) If a customer purchases an item of eligible clothing or footwear before the exemption period and, during the exemption period, returns the item and receives credit on the purchase of a different item of eligible clothing or footwear, sales tax is not due on the sale of the new item if it is purchased during the exemption period.

  (4) Examples.

    (a) A customer purchases a $35 shirt during the exemption period. After the exemption period, the customer exchanges the shirt for the same shirt in a different size. Tax is not due on the $35 price of the shirt purchased after the exemption period.

    (b) A customer purchases a $35 shirt during the exemption period. After the exemption period, the customer exchanges the shirt for a $35 jacket. Because the jacket was not purchased during the exemption period, tax is due on the $35 price of the jacket.

    (c) During the exemption period, a customer purchases a $90 dress that qualifies for the exemption. Later, during the exemption period, the customer exchanges the $90 dress for a $150 dress. Tax is due on the $150 dress. The $90 credit from the returned item cannot be used to reduce the sales price of the $150 item to $60 for exemption purposes.

    (d) During the exemption period, a customer purchases a $60 dress that qualifies for the exemption. Later, during the exemption period, the customer exchanges the $60 dress for a $95 dress. Tax is not due on the $95 dress because it was also purchased during the exemption period and otherwise meets the qualifications for the exemption.

L. Returned Merchandise. For a 30-day period after the temporary exemption period, when a customer returns an item that would qualify for the exemption, a credit for, or refund of, sales tax may not be given unless the customer provides a receipt or invoice showing tax was paid, or the retailer has sufficient documentation to show that tax was paid on the specific item. This 30-day period is set solely for the purpose of designating a time period during which the customer shall provide documentation showing that sales tax was paid on returned merchandise. The 30-day period is not intended to change a retailer's policy concerning the time period during which the retailer will accept returns.

M. Mail, Telephone, E-mail, and Internet Orders and Custom Orders.

  (1) A sale of tangible personal property occurs when title or possession of the property is transferred in exchange for consideration. Therefore, an item of eligible clothing or footwear may qualify for this exemption if:

    (a) The item is both delivered to and paid for by the customer during the exemption period; or

    (b) The item is ordered and paid for by the customer and the order is accepted by the retailer during the exemption period for immediate shipment, even if delivery is made after the exemption period.

  (2) An order is for immediate shipment when delayed shipment is not requested by the customer and notwithstanding that the shipment may be delayed because of a backlog of orders, or because stock is currently unavailable or on back-order by the company.

N. Shipping and Handling Charges.

  (1) A separately stated shipping or delivery charge is not included in the sales price of the clothing or footwear to determine if the price of the item is $100 or less.

  (2) A combined shipping and handling charge, however, is included as part of the sales price of the clothing or footwear, even if the combined charge is separately stated from the price of the item, and shall be added to the price of the clothing or footwear to determine if the price of the item is $100 or less. If multiple items are shipped on a single invoice, the shipping and handling charge shall be proportionately allocated to each item ordered, and separately identified on the invoice, to determine if any items qualify for the exemption.

  (3) Examples.

    (a) A customer orders a jacket for $95 during the exemption period. An additional charge of $10 is separately stated on the bill for shipping. The shipping charge is not included in the price subject to the tax and the price of the jacket is, therefore, $95 and qualifies for the exemption.

    (b) A customer orders a jacket for $95 during the exemption period. A shipping and handling charge of $10 is added to the bill. The sales price of the jacket is $105 and tax is due on the full sales price.

    (c) A customer orders a suit for $285 and a shirt for $95. The charge to deliver the items is $15. The $15 shipping and handling charge must be proportionately and separately allocated between the items: $285/$380 = 75 percent; therefore, 75 percent of the $15 shipping and handling charge, or $11.25, must be allocated to the suit, and separately identified on the invoice. The remaining 25 percent of the $15 shipping and handling charge, or $3.75, must be allocated to the shirt, and separately identified on the invoice. The sales price of the shirt is $95 plus $3.75, totaling $98.75; therefore, the shirt qualifies for the exemption.

O. Documenting Exempt Sales. The retailer is not required to obtain an exemption certificate on sales of eligible items during the exemption period. However, the retailer's records shall clearly identify the type of item sold, the date the item was sold, and the sales price of the item.

P. Reporting Exempt Sales. Special reporting procedures are not necessary to report exempt sales made during the exemption period. Sales shall be reported as currently required by law.

Q. Absorption of the Sales Tax.

  (1) A vendor may assume and absorb all or any part of the sales and use tax on a retail sale and pay that tax on behalf of the buyer.

  (2) The vendor shall separately state the tax from the sales price at the time of sale to purchaser.

  (3) The vendor shall pay the tax with the return that covers the period in which the vendor makes the sale.

#### Regulation .38 Advertising Agencies.

*COMAR 03.06.01.38*

A. In General.

  (1) An advertising agency is providing nontaxable advertising services when the transaction with the client is for:

    (a) The preparation and placement of advertising in print, broadcast, or digital media;

    (b) Public relations;

    (c) Setting up press conferences;

    (d) Conducting market research; or

    (e) Creative concept development.

  (2) An advertising agency is selling tangible personal property or a digital product when the transaction with the client is for the production and transfer of specific property, including property that the client uses:

    (a) In its business, such as signage, letterhead stationery, business cards, annual reports, or audio or video tapes; or

    (b) To convey its commercial message, such as brochures, flyers, posters, displays, or finished artwork.

B. Advertising Agency Purchases.

  (1) Office Supplies. Advertising agencies shall pay sales and use tax on purchases of office supplies, equipment, and other materials used in their business.

  (2) Purchases Used or Consumed in Providing Advertising Services. When the transaction with its client is for advertising services, the advertising agency shall pay sales and use tax on its taxable purchases and taxable services that it uses or consumes in providing those services, such as:

    (a) Artwork or photography for preliminary layouts;

    (b) Finished art that is reproduced in print media;

    (c) Recorded music;

    (d) Rentals of recording studio equipment and facilities; and

    (e) Audio and video cassettes and film.

  (3) Purchases Used in Producing Tangible Personal Property or Digital Product for Sale. When the transaction with its client is for the sale of tangible personal property or a digital product, the advertising agency shall pay sales and use tax on its taxable purchases and taxable services that it uses in producing the property or digital product, unless the material purchased is to be incorporated as a component or part of other property or digital products produced for sale as set forth in §B(4)(b) of this regulation.

  (4) Purchases for Resale. When the transaction with its client is for the sale of tangible personal property or a digital product, an advertising agency may claim the resale exclusion for:

    (a) Tangible personal property, digital products, and taxable services purchased solely for resale to a client in the same form in which it receives the property, digital product, or services, such as:

      (i) Finished brochures;

      (ii) Catalogs;

      (iii) Stationery,

      (iv) Specialty advertising items;

      (v) Signs; and

      (vi) Digital images; and

    (b) Tangible personal property, digital products, or taxable services that are incorporated as a part or component of property produced for sale, such as poster board and lettering for signs or displays.

C. Tangible Personal Property Purchased by an Advertising Agency Acting as an Agent of a Specific Client.

  (1) An advertising agency may be considered to be the agent of its client with respect to a particular purchase only if:

    (a) The advertising agency clearly discloses to the supplier the name of the client and that it is acting as that client's agent;

    (b) The price billed to the client, except for a separately stated standard agency fee, is the same as the amount paid to the supplier; and

    (c) The advertising agency makes no use of the property in preparing, assembling, fabricating, or producing property for sale or in providing advertising services, and does not charge the property to the account of more than one client.

  (2) Notwithstanding the presence of the three minimum requirements set forth in §C(1) of this regulation, an agency relationship will not be presumed. The person claiming agency bears the burden of establishing the agency relationship. The party claiming agency shall demonstrate, by clear and convincing evidence, such as a written contract, that, at the time the transaction was entered into, the parties intended to create an agency relationship with respect to purchases.

  (3) An advertising agency making a purchase of property as the agent of a specific client shall pay the sales and use tax that the client would be required to pay if it was making the purchase directly from the supplier. The client, as buyer, is ultimately responsible for payment of the sales and use tax and for maintaining records showing that the sales and use tax has been paid.

  (4) Any claim that a transaction is tax exempt by reason of an advertising agency's acting as an agent of a tax-exempt client shall be supported, at the time of the transaction, by certification to the supplier of the client's tax exempt status, including the 8-digit serial number and the expiration date of the client's exemption certificate.

D. Advertising Agency Sales.

  (1) Advertising agencies shall charge and collect sales and use tax on all sales of tangible personal property unless a statutory exemption applies. Charges for creative, consultation, or design services rendered or performed in connection with the production of tangible personal property for sale are subject to sales tax, even if separately stated. Similarly, charges for preliminary property, such as artwork, layouts, mock-ups, or models, produced for the agency's use or for the client's approval in connection with the production of the property for sale, are subject to sales tax, even if separately stated.

  (2) The tax does not apply to charges for initial consultations or preliminary artwork if:

    (a) The consultations are provided and artwork is prepared to discuss and demonstrate an idea or message before the client enters into a contract or understanding with the agency for the production of tangible personal property for sale;

    (b) Title to the preliminary artwork does not pass to the client;

    (c) The preliminary artwork is not physically incorporated into the property produced for sale; and

    (d) There is a separately stated charge clearly identifying the billing for the consultation or preliminary artwork.

  (3) If there is a written or unwritten contract or understanding that the agency will produce a product for sale, all charges, including those for additional services or artwork, are subject to sales tax.

#### Regulation .39 Detective, Guard, Armored Car Services, and Security Systems.

*COMAR 03.06.01.39*

A. In this regulation, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Armored car service” does not include coin rolling or change room services, as long as these charges are separately stated.

  (2) “Detective” means a person who is authorized to provide private detective services under Business Occupations and Professions Article, Title 13, Annotated Code of Maryland.

  (3) Detective Service.

    (a) “Detective service” means to conduct an investigation concerning:

      (i) A crime or wrong committed, assumed to have been committed, or threatened to be committed;

      (ii) The identity, habits, conduct, movement, location, affiliations, associations, transactions, reputation, or character of any person;

      (iii) The credibility of a witness or of any other individual;

      (iv) The location of a missing individual;

      (v) The location or recovery of lost or stolen property;

      (vi) The origin, cause of, or responsibility for a fire, accident, damage to or loss of property, or injury to an individual, regardless of who conducts the investigation;

      (vii) The affiliation, connection, or relation of any person with an organization or other person;

      (viii) The activities, conduct, efficiency, loyalty, or honesty of any employee, agent, contractor, or subcontractor; or

      (ix) The financial standing, creditworthiness, or financial responsibility of any person.

    (b) “Detective service” includes:

      (i) Securing evidence for use before any investigating committee, board of award, or board of arbitration, or for use in the trial of any civil or criminal cause;

      (ii) Providing uniformed or nonuniformed personal protection;

      (iii) Conducting polygraph testing;

      (iv) Conducting background checks on prospective employees or tenants; or

      (v) Conducting background checks on individuals by or at the request of an insurance company for worker's compensation purposes.

    (c) “Detective service” does not include private process service unless the service goes beyond service of process to a missing person investigation.

  (4) “Security guard service” includes any activity that is performed for compensation as a security guard to protect any individual or property.

  (5) Security Systems Service.

    (a) “Security systems service” means providing on the premises of a person's residential or commercial property the service of:

      (i) Monitoring an electronically controlled burglar or fire alarm system for any residential or commercial property located in the State; or

      (ii) Responding to a distress call or an alarm sounding from a security system.

    (b) “Security systems service” does not include:

      (i) Installing a burglar or fire alarm system in commercial or residential property;

      (ii) Maintaining or repairing a security system for a customer;

      (iii) Monitoring property located entirely outside of the State, even if the equipment used to perform the monitoring service is located in the State; or

      (iv) Providing a medical response system used by individuals to summon medical aid.

C. Taxability.

  (1) The sales and use tax applies to the sale of a security service, which includes:

    (a) A detective service;

    (b) A security guard service;

    (c) An armored car service; and

    (d) A security systems service.

  (2) The application of the Maryland sales and use tax to charges for security services is controlled by the delivery point of the services. For example, an investigation that encompasses a number of states but results in a report of the investigation being delivered to a client in Maryland is subject to the Maryland sales and use tax. However, an investigation conducted entirely in Maryland which results in a report delivered to an out-of-State client is not subject to the Maryland sales and use tax.

  (3) Armored car services delivered in Maryland are subject to the sales and use tax, although the vendor may reasonably apportion any charges for any out-of-State delivery component. Acceptable apportionment methods include distance, time, or number of stops within and outside of the State.

  (4) Security Monitoring Systems.

    (a) Except as set forth in §C(4)(b) of this regulation, the installer of security systems in commercial or residential property shall pay the sales and use tax on the cost of all materials that are installed in such a manner as to become real property.

    (b) Equipment that is used to operate or monitor a security system or functions independently as a standalone electronic device whether wired to the system or wireless and is property normally treated as tangible personal property, does not become part of the realty even though it may be used as part of the security system to monitor, secure, and control access to realty. Examples of such equipment include, but are not limited to, computers, laptops, VCRs, DVDs, cameras, monitors, and televisions.

    (c) Installers or sellers of tangible personal property included in or as part of a commercial or residential security system shall separately state the charge for tangible personal property on any invoice, contract of sale, or lease, and shall charge the sales and use tax to the purchaser. Installers or sellers of items that do not become part of the realty may issue their supplier a resale certificate to purchase the tangible personal property tax-free.

#### Regulation .40 Sourcing Cellular Telephone and Other Mobile Telecommunications Services Charges.

*COMAR 03.06.01.40*

A. Definitions.

  (1) In this regulation, the following terms have the meaning indicated.

  (2) Terms Defined.

    (a) “Act” means the Mobile Telecommunications Sourcing Act, 4 U.S.C. §116, et seq.

    (b) “Customer” means:

      (i) The person that contracts with the home service provider for mobile telecommunications services; or

      (ii) For the purpose of determining the place of primary use, if the end user of mobile telecommunications services is not the contracting party, the end user of the mobile telecommunications service.

    (c) “Home service provider” means the facilities-based carrier or reseller with which the customer contracts for mobile telecommunications services.

    (d) “Licensed service area” means the geographic area in which the home service provider may by law or contract provide commercial mobile radio service to the customer.

    (e) “Place of primary use” means the street address representative of where the customer's use of the mobile telecommunications service primarily occurs, which shall be:

      (i) The residential street address or the primary business street address of the customer; and

      (ii) Within the licensed service area of the home service provider.

B. Tax on Cellular Telephone and Other Mobile Telecommunications Services. Charges for cellular telephone and other mobile telecommunications services are subject to sales and use tax in the State as provided in Tax-General Article, Title 11, Annotated Code of Maryland, this regulation, and to the extent consistent with this regulation, the Act.

C. Sourcing of Cellular Telephone and Other Mobile Telecommunications Services.

  (1) Tax shall be charged based on a determination that the State is the customer's place of primary use, regardless of where the mobile telecommunication services originate, terminate, or pass through.

  (2) A home service provider shall employ an enhanced zip code to identify each street address in the State which is its customer's primary place of use.

D. Determining Tax on Cellular Telephone or Other Mobile Telecommunications Services.

  (1) If a home service provider can reasonably identify nontaxable charges based on records regularly kept in the course of business, tax under this regulation may not be charged on the nontaxable charges, even if the nontaxable charges are not separately stated from the taxable charges.

  (2) Prepaid telephone calling arrangements are not covered by this regulation and are subject to tax if purchased in a retail sale in the State.

#### Regulation .41 Sales of Appliances Meeting Certain Efficiency Requirements and Multifuel Pellet Stoves.

*COMAR 03.06.01.41*

A. Repealed.

B. Repealed.

C. The sales and use tax does not apply to a sale of a multifuel pellet stove designed to burn agricultural field corn. The fact that agricultural field corn can be burned in a stove not specifically designed for the burning of agricultural field corn does not exempt the sale of that stove from the tax. Vendors and purchasers of multifuel pellet stoves shall keep records or documentation identifying the items as meeting the requirements for the exemption under this regulation.

#### Regulation .42 Effective Rate Agreements.

*COMAR 03.06.01.42*

A. Definitions.

  (1) In this regulation, the following terms have the meanings indicated.

  (2) Terms Defined.

    (a) “Effective rate” means a calculated percentage derived from analysis of selected accounts for a selected sample period.

    (b) “Effective rate agreement” means an agreement between the Comptroller and a vendor that allows a vendor to compute its sales and use tax liability for purchases made by the vendor for a specific period using a predetermined agreed upon effective rate.

B. On or after July 1, 2002, the Comptroller may enter into an effective rate agreement to allow a vendor to compute its sales and use tax liability reportable on purchases.

C. Requirements.

  (1) An effective rate agreement shall:

    (a) Specify the types of records to be maintained by the vendor;

    (b) Have a predetermined expiration date; and

    (c) Contain provisions for modification of the effective rate due to law changes and court decisions that have an affect on the sales and use tax due.

  (2) An effective rate agreement may exclude specific types of purchases of specific dollar amounts.

  (3) To be eligible for an effective rate agreement, a vendor:

    (a) Shall maintain an acceptable system of internal controls and business records;

    (b) Shall make a large volume of taxable purchases in the effective rate period applied for;

    (c) May not have a history of poor or improper reporting of taxes collected;

    (d) May not have filed for bankruptcy within the last 10 years or be controlled by a related taxpayer that has filed for bankruptcy within the last 10 years; and

    (e) May not have been or currently be a subject of a criminal or fraud investigation.

  (4) Applications to enter into an effective rate agreement with the Comptroller shall be in writing and contain the following vendor information:

    (a) Name;

    (b) Address;

    (c) Central registration number;

    (d) Type of business;

    (e) Gross annual sales and purchases;

    (f) Reason for the request to enter into an effective rate agreement;

    (g) A statement attesting that the vendor meets the minimum criteria stated in §C(3) of this regulation; and

    (h) Signature of an officer responsible for the payment of taxes.

D. Revocation of an Effective Rate Agreement.

  (1) Either the Comptroller or the vendor may void an effective rate agreement without cause after 30 days written notice.

  (2) The Comptroller may void an effective rate agreement:

    (a) If the vendor's operation significantly changed during the term of the agreement;

    (b) Immediately upon revocation of the direct pay permit; or

    (c) For cause.

E. An effective rate agreement may not be implemented until the vendor has applied for and is issued a direct payment permit by the Comptroller.

#### Regulation .43 Geothermal and Residential Wind Energy and Solar Equipment.

*COMAR 03.06.01.43*

A. Definitions.

  (1) In this regulation, the following terms have the meaning indicated:

  (2) Defined Terms.

    (a) “Equipment” means an implement, such as a tool, apparatus, appliance, utensil, or instrument, used to perform a mechanical or manual operation.

    (b) “Geothermal equipment” means equipment that uses ground loop technology to heat and cool a structure.

    (c) “Residential wind energy equipment” means equipment installed on residential property that uses wind energy to generate electricity to be used in a residential structure on the property.

    (d) Solar Energy Equipment.

      (i) “Solar energy equipment” means equipment that uses solar energy to heat or cool a structure, generate electricity to be used in a structure or supplied to the electric grid, or provide hot water for use in a structure.

      (ii) “Solar energy equipment” does not include equipment that is part of a nonsolar energy system, such as a window, floor or other passive solar material that does not involve the use of a mechanical or electronic device but is designed to enhance or improve the functionality of a traditional heating or cooling system, or that uses any type of recreational facility or equipment as a storage medium, such as a pool or hot tub.

B. Exempt Sales.

  (1) The sales and use tax does not apply to a sale of geothermal equipment, residential wind energy equipment, or solar energy equipment.

  (2) The exemption includes the sale of equipment and other material that is attached, applied, fabricated, or assembled in such a manner that it comprises a complete geothermal, residential wind energy, or solar energy system.

  (3) Material such as sand, gravel, or grout, although necessary for the system to be built or to function properly, is not equipment or a component of equipment and, therefore, is not exempt from the tax.

  (4) Vendors, in lieu of collecting the tax, may accept a signed statement from the buyer certifying that the tangible personal property purchased is qualifying geothermal, residential wind energy, or solar energy equipment. The vendor shall retain the statement with the record of sale.

  (5) If sales and use tax is paid on the sale of an item that qualifies for an exemption the person paying the tax may apply to the Comptroller for a refund pursuant to COMAR 03.03.03.05.

#### Regulation .44 Tax-Free Weekend for Certain Energy Efficient Equipment.

*COMAR 03.06.01.44*

A. Definitions.

  (1) In this regulation, the following terms have the meanings indicated.

  (2) Terms Defined.

    (a) “Compact fluorescent light bulb” means a fluorescent light bulb that has been compressed into the size of a standard-issue screw-in incandescent light bulb.

    (b) “Energy Star product” means an air conditioner, clothes washer, clothes dryer, furnace, heat pump, standard size refrigerator, compact fluorescent light bulb, dehumidifier, boiler, or programmable thermostat that has been designated as meeting or exceeding the applicable Energy Star efficiency requirements developed by the U.S. Environmental Protection Agency and the United States Department of Energy and is authorized to carry the Energy Star label. For the period July 1, 2014 through June 30, 2017, “Energy Star product” also means a light-emitting diode (LED) light bulb that meets or exceeds the same Energy Star efficiency criteria.

    (c) “Solar water heater” means a system composed of equipment designed to heat water by the use of solar energy.

    (d) “Standard size refrigerator” means a refrigerator with a factory-built, self-contained cabinet that is marketed for use in a private residence or household, whether or not used in a private residence.

B. Exempt Sales.

  (1) The sales and use tax does not apply to the sale of a qualified Energy Star product or a solar water heater that is sold between 12:01 a.m. on the Saturday immediately preceding the third Monday in February and 11:59 p.m. on the third Monday of February, beginning in February 2011 and on such dates each February thereafter.

  (2) Requirements for Exemption.

    (a) The sale is considered made during the tax-free period if the contract of sale and payment for the product takes place during the specified period, even if delivery of the product is delayed until after the period.

    (b) For lay-away sales, the sale will be considered to be made during the tax-free period if the contract of sale is entered into and the initial payment is made during the specified period and the product is removed from normal inventory and set aside for the purchaser at that time.

    (c) A product purchased pursuant to a rain check is not eligible for exemption unless the contract of sale and payment for the product takes place during the specified period.

    (d) The initial lease payment for a qualifying product will be exempt from sales and use tax if the lease agreement is entered into and the first payment is made during the specified period.

    (e) For catalogue or internet sales, the sale will be considered to be made during the tax-free period if the transaction is completed, payment is made, and the vendor has taken action to immediately fulfill the order during the specified period.

  (3) If sales and use tax is paid on the sale of an item that qualifies for exemption, the person paying the tax may apply to the Comptroller for a refund pursuant to COMAR 03.06.03.05.

  (4) In addition to record-keeping requirements under Tax-General Article, §11-504, Annotated Code of Maryland, vendors and purchasers of Energy Star products and solar water heaters shall keep records or documentation identifying the items as meeting the requirements for the exemption under this regulation for a period of 4 years from the date of the sale.

#### Regulation .45 Sales and Use Tax on Sales of Dyed Diesel Fuel by Marinas.

*COMAR 03.06.01.45*

A. Definitions.

  (1) In this regulation, the following terms have the meanings indicated.

    (a) “Dyed diesel fuel” means diesel fuel that is dyed under U.S. Environmental Protection Agency rules for high sulfur diesel fuel or is dyed under Internal Revenue Service rules for nontaxable use.

    (b) “Marina” means an entity that maintains a place of business where motor fuel is sold primarily to vessels.

B. Tax Computation.

  (1) A marina that sells dyed diesel fuel on or after July 1, 2012:

    (a) Shall pay the sales and use tax on that sale directly to the Comptroller; and

    (b) May not collect the tax from the buyer as a separately stated item.

  (2) To compute the sales and use tax, the marina shall apply the 6 percent tax rate to 94.5 percent of the taxable gross receipts from the sale of dyed diesel fuel.

C. Records. A marina shall issue a receipt or other record of sale to the buyer that clearly indicates that the sales and use tax is included in the price charged.

D. Exempt Sales.

  (1) If a sale of dyed diesel fuel by a marina qualifies for exemption from sales and use tax, the vendor shall reduce the tax-included price of the dyed diesel fuel by the proportionate amount of tax included in the price.

  (2) The receipt or other record of sale shall clearly indicate that the price charged has been reduced by the tax amount.

  (3) A sale of dyed diesel fuel or repair part to be used in a commercial fishing vessel or a vessel otherwise used for commercial purposes is exempt from the tax. A marina may require that the customer certify in a signed written statement that the dyed diesel fuel or repair part is to be used in a commercial fishing vessel or for an otherwise commercial purpose if the record of sale does not otherwise clearly indicate entitlement to exemption.

#### Regulation .46 Parent-Teacher Organization Fundraisers.

*COMAR 03.06.01.46*

A. Definitions.

  (1) In this regulation, the following terms have the meanings indicated.

  (2) Terms Defined.

    (a) “Organization within an elementary or secondary school” means a formal group of students, teachers, administrators, and/or parents of students that is recognized by an elementary or secondary school and that promotes, leads, or supports participation in an educational or extra-curricular activity at or on behalf of that school and whose activities include fund raising on behalf of the organization.

    (b) “Organization within a school system” means a formal group of students, teachers, administrators, and/or parents of students that is recognized by a Maryland school system, not including the school itself, and that promotes, leads, or supports participation in an educational or extra-curricular activity at or on behalf of that school system or one or more schools within that school system and whose activities include fund raising on behalf of the organization.

    (c) “Parent-teacher organization” means a formal organization of parents, teachers and school staff of an elementary or secondary school that facilitates parental participation in a school and whose activities include fund raising on behalf of the organization.

    (d) “School system in the State” means one of the twenty-three county school systems in Maryland or the Baltimore City school system.

B. Except as provided in COMAR 03.06.01.22C(2)(e), a sale by a parent-teacher organization or other organization within an elementary or secondary school in the State or within a school system in the State does not include a sale where the parent-teacher organization or other organization accepts payment on behalf of a third-party vendor, even if said organization receives some portion of the proceeds of the sale.

C. A sale of tangible personal property, digital codes, or digital products by any of the following organizations is exempt from the tax:

  (1) A parent-teacher organization within an elementary or secondary school in the State;

  (2) A parent-teacher organization within a school system in the State;

  (3) An organization within an elementary or secondary school in the State;

  (4) An organization within a school system in the State.

#### Regulation .47 Cannabis.

*COMAR 03.06.01.47*

A. Scope. This regulation applies to all businesses required to be licensed or registered by the Maryland Cannabis Administration, including growers, micro growers, processors, microprocessors, incubator space operators, dispensaries, micro dispensaries, on-site consumption establishments, nurseries, and delivery services.

B. Definitions.

  (1) In this regulation, the following terms have the meanings indicated.

  (2) Terms Defined.

    (a) “Cannabis” has the meaning stated in Alcoholic Beverages and Cannabis Article, §1-101, Annotated Code of Maryland.

    (b) “Cannabinoid beverage” has the meaning stated in Alcoholic Beverages and Cannabis Article, § 36–101, Annotated Code of Maryland;

    (c) “Cannabis business” means a cannabis business that is licensed  under Alcoholic Beverages and Cannabis Article, Title 36, Annotated Code of Maryland.

    (d) “Cannabis nursery” means a cannabis nursery that is registered under Alcoholic Beverages and Cannabis Article, Title 36, Annotated Code of Maryland.

    (e) “Delivery service” has the meaning stated in Alcoholic Beverages and Cannabis Article, §36-101, Annotated Code of Maryland.

    (f) “Medical cannabis” means cannabis that is:

      (i) Purchased by or administered to an individual who is registered as a qualifying patient, as defined in Alcoholic Beverages and Cannabis Article, §36-101, Annotated Code of Maryland; or

      (ii) Purchased by a caregiver, as defined in Alcoholic Beverages and Cannabis Article, §36-101, Annotated Code of Maryland.

    (g) “Vaping liquid” has the meaning indicated in Business Regulation Article, §16.7-101, Annotated Code of Maryland.

C. Returns and Record Keeping.

  (1) A cannabis business shall:

    (a) Maintain records as required by law; and

    (b) Comply with all statutory and regulatory reporting requirements, and any other requirements published by the Comptroller.

  (2) For each separate return required to be filed under COMAR 03.06.03.03, a cannabis business may claim the credit allowed under Tax-General Article, §11-105, Annotated Code of Maryland, for timely filing a sales and use tax return.

D. Exemptions.

  (1) Sales Between Cannabis Businesses.

    (a) Subject to §D(1)(b) and (c) of this regulation, the sales and use tax does not apply to the retail sale of cannabis between cannabis businesses or between cannabis businesses and cannabis nurseries.

    (b) A licensed buyer shall present a resale certificate to the licensed seller as evidence of eligibility for the exemption under §D(1)(a) of this regulation.

    (c) A seller shall retain a record of the sale in compliance with COMAR 03.06.03.02.

    (d) Except as provided in §D(1)(e) of this regulation, the resale certificate shall include the information required in Regulation .14 of this chapter.

    (e) If the buyer is not required to obtain a sales and use tax license, the buyer shall include its cannabis business license number instead of a sales and use tax registration number on its resale certificate.

  (2) Sales of Medical Cannabis.

    (a) The sales and use tax does not apply to the sale of medical cannabis under Alcoholic Beverages and Cannabis Article, Title 36, Annotated Code of Maryland.

    (b) For every sale of medical cannabis, the seller shall record the qualifying patient or caregiver’s registration number and retain a record of the sale in compliance with COMAR 03.06.03.02.

E. Clarifications.

  (1) Notwithstanding Tax-General Article, §11-104(j), Annotated Code of Maryland, regarding the sales and use tax rate for certain vaping liquid containers, the sales and use tax rate for vaping liquid containing cannabis shall be the rate applicable to cannabis under Tax-General Article, §11-104(k), Annotated Code of Maryland.

  (2) Notwithstanding the exemption from sales and use tax for certain food, the sale of food or edible products containing cannabis or cannabinoid beverages shall be subject to the sales and use tax rate applicable to cannabis under Tax-General Article, §11-104(k), Annotated Code of Maryland.

#### Regulation .48 Data or Information Technology Services and Software Publishing Services.

*COMAR 03.06.01.48*

A. Definitions.

  (1) In this regulation, the following terms have the meaning indicated.

  (2) Terms Defined.

    (a) “Buyer” has the meaning stated in Tax-General Article, §11-101(b), Annotated Code of Maryland.

    (b) “Cloud computing” means a service that enables on-demand, self-service network access to a shared pool of configurable computer resources, including data storage, analytics, commerce, streaming, e-mail, document sharing, and document editing.

    (c) “Customer tax address” has the meaning stated in Tax-General Article §11-101(c-1), Annotated Code of Maryland.

    (d) “Data or information technology service” means services described under NAICS sectors 518, 519, and subsector 5415.

    (e) “Emerging technology development area” means the University of Maryland’s Discovery District located in Prince George’s County.

    (f) “NAICS” means the North American Industrial Classification System, United States Manual, 2022 Edition, published by the United States Office of Management and Budget.

    (g) “Services described under NAICS subsector 5132” means:

      (i) Applications development and publishing (except on a custom basis);

      (ii) Computer software publishing and reproduction;

      (iii) Gaming site publishing;

      (iv) Mobile applications development and publishing (except on a custom basis);

      (v) Packaged computer applications software;

      (vi) Packaged computer operating systems software;

      (vii) Packaged computer software publishing;

      (viii) Packaged computer utility software;

      (ix) Packaged programming language and compiler software publishing;

      (x) Packaged software publishing;

      (xi) Publishing computer software for games; and

      (xii) Software publishing.

    (h) “Services described under NAICS sector 518” means:

      (i) Application hosting (excluding software publishing);

      (ii) Automated data processing;

      (iii) Cloud computing (except software publishing and computer systems design);

      (iv) Cloud storage;

      (v) Co-location in data centers (i.e., rental of server and networking space in data centers);

      (vi) Computer data storage;

      (vii) Computer input preparation;

      (viii) Computer time leasing;

      (ix) Computer time rental;

      (x) Computer time sharing;

      (xi) Computing infrastructure provision;

      (xii) Computing platform infrastructure provision;

      (xiii) Data capture imaging;

      (xiv) Data entry;

      (xv) Data processing computer services;

      (xvi) Data processing (except payroll services, financial transaction processing services);

      (xvii) Disk and diskette conversion;

      (xviii) Disk and diskette recertification;

      (xix) Electronic data processing;

      (xx) Game server hosting;

      (xxi) Infrastructure as a service (IaaS);

      (xxii) Media streaming data storage;

      (xxiii) Media streaming technical support;

      (xxiv) Microfiche recording and imaging;

      (xxv) Microfilm recording and imaging;

      (xxvi) Optical scanning;

      (xxvii) Platform as a service (PaaS);

      (xxviii) Video and audio technical streaming support;

      (xxix) Video tape and film stock technical streaming support;

      (xxx) Virtual currency (cryptocurrency) mining; and

      (xxxi) Web hosting (excluding software publishing).

    (i) “Services described under NAICS sector 519” means:

      (i) Archives;

      (ii) Bookmobiles;

      (iii) Centers for documentation (i.e., archives);

      (iv) Circulating libraries;

      (v) Film archives;

      (vi) Internet search portals;

      (vii) Internet search websites;

      (viii) Lending libraries;

      (ix) Libraries (except motion picture stock footage, motion picture commercial distribution);

      (x) Motion picture film libraries;

      (xi) Music archives;

      (xii) News clipping services;

      (xiii) Press clipping services;

      (xiv) Provision of stock photos;

      (xv) Reference libraries;

      (xvi) Telephone-based recorded information services;

      (xvii) Title search services (except real estate); and

      (xviii) Web search portals.

    (j) “Services described under NAICS subsector 5415” means:

      (i) Audio visual and IT (information technology) systems integration design;

      (ii) CAD (computer-aided design) systems integration design;

      (iii) CAE (computer-aided engineering) systems integration design;

      (iv) CAM (computer-aided manufacturing) systems integration design;

      (v) Computer disaster recovery;

      (vi) Computer hardware consulting;

      (vii) Computer network systems integration design;

      (viii) Computer software consulting;

      (ix) Computer systems integration analysis and design;

      (x) Computer systems integration design consulting;

      (xi) Computer systems integrator;

      (xii) Computer software installation;

      (xiii) Computer systems facilities (i.e., client’s facilities) management and operation;

      (xiv) Custom computer application software programming;

      (xv) Custom computer program or software development;

      (xvi) Custom computer programming services;

      (xvii) Custom computer software analysis and design;

      (xviii) Custom computer software support;

      (xix) Custom search engine optimization (SEO) (except hosting and infrastructure support services);

      (xx) Custom software programming;

      (xxi) Custom webpage design services;

      (xxii) Data processing facilities (i.e., client’s facilities) management and operation;

      (xxiii) Industrial robot automation applications/software design and development;

      (xxiv) Industrial robot programming;

      (xxv) Information management computer systems integration design;

      (xxvi) Local area network (LAN) computer system integration design;

      (xxvii) Machine vision software design and development;

      (xxviii) Material handling robot applications/software design and development;

      (xxix) Office automation computer systems integration design;

      (xxx) Robotics applications/software design and development;

      (xxxi) Robotics process automation software design and development; and

      (xxxii) Welding robot applications/software design and development.

    (k) “Qualified Company” means a company that contracts with the University of Maryland’s Applied Research Laboratory for Intelligence and Security to develop systems and technologies to advance the use of quantum computing.

    (l) “Qualified Cybersecurity Business” means an entity organized for profit that is engaged primarily in the development of innovative proprietary cybersecurity technology or the provision of cybersecurity services.

    (m) “Retail sale” has the meaning stated in Tax-General Article, §11-101(h), Annotated Code of Maryland.

    (n) “Software publishing service” means a system software or application software publishing service described under NAICS subsector 5132.

    (o) “Taxable price” has the meaning stated in Regulation .08 of this chapter.

    (p) “Vendor” has the meaning stated in Tax-General Article, §11-101(o), Annotated Code of Maryland.

  (3) Every classification detail under a NAICS sector's or subsector's industry groups, NAICS industries, and national industries includes all listed services, which can be performed together, separately, or in any combination.

B. The sale of data or information technology services or software publishing services in the State are subject to sales and use tax in the State as provided in Tax-General Article, Title 11, Annotated Code of Maryland.

C. Except as provided in Regulation .49 of this chapter, a retail sale of a data or information technology service or software publishing service is presumed to be made in the state in which the customer tax address is located.

D. Application of NAICS sector codes.

  (1) Each service the vendor provides must be evaluated individually to determine whether it is a data or information technology service or software publishing service.

  (2) A vendor may not rely on the principal business activity code reported on the vendor’s annual income tax return to determine whether the services the vendor provides are subject to sales and use tax.

E. A buyer who is registered to remit sales and use tax may present to a vendor a certificate indicating multiple points of use of a data or information technology service or software publishing service as provided in Regulation .49 of this chapter.

F. Exempt Sales.

  (1) The sales and use tax does not apply to:

    (a) A sale of cloud computing to a qualified cybersecurity business;

    (b) A sale of a data or information technology service or software publishing service to a qualified company located in an emerging technology development area made in connection with the work of the company; or

    (c) A sale of a data or information technology service or software publishing service by a qualified company in an emerging technology development area.

  (2) The exemption in §F(1) of this regulation does not apply to any tangible personal property, digital product, digital code, or taxable service sold with the exempt service.

  (3) A vendor may accept a signed statement from a buyer certifying the exemption under §F(1)(a) or (b) of this regulation applies unless if, at the time of acceptance, the vendor knows or should have known that the exemption does not apply. The vendor shall retain the statement with the record of sale.

  (4) If sales and use tax is paid on the sale of a service that qualifies for an exemption, the person paying the tax may apply to the Comptroller for a refund pursuant to COMAR 03.06.03.05.

#### Regulation .49 Multiple Points of Use Certificates.

*COMAR 03.06.01.49*

A. Definitions.

  (1) In this regulation, the following terms have the meaning indicated.

  (2) Terms Defined.

    (a) “Affiliated Group” has the meaning stated in Internal Revenue Code §1504.

    (b) “Affiliated Group” includes related parties described under Internal Revenue Code §267(b)(10)—(12).

    (c) “Authorized buyer” means a buyer authorized by the Comptroller to issue a multiple points of use certificate in accordance with this regulation.

    (d) “Buyer” has the meaning stated in Tax-General Article, §11-101(b), Annotated Code of Maryland.

    (e) “Data or information technology service” has the meaning stated in Regulation .48 of this chapter.

    (f) “Multiple points of use certificate” means a certificate presented by an authorized buyer to a vendor that indicates, in accordance with Tax-General Article, §11-403(e), Annotated Code of Maryland, that a digital code, digital product, taxable data or information technology service or software publishing service will be concurrently available for use by the buyer or a related entity both in the State and outside of the State.

    (g) “Related entity” means a member of an affiliated group or a related pass-through entity of which the buyer is also a member.

    (h) “Related Pass-Through Entities” means one or more pass-through entities connected through ownership with a common parent pass-through entity but only if the common parent:

      (i) Possesses at least 80 percent of the total voting power of the total value of the pass-through entity; and

      (ii) Has a value equal to at least 80 percent of the total value of the pass-through entity.

    (i) “Software publishing service” has the meaning stated in Regulation .48 of this chapter.

    (j) “Vendor” has the meaning stated in Tax-General Article, §11-101(o), Annotated Code of Maryland.

B. Multiple Points of Use Certificate Requirements.

  (1) To issue a multiple points of use certificate, a buyer must:

    (a) Be registered with the Comptroller for a sales and use tax account before requesting authorization to issue a multiple points of use certificate;

    (b) Submit to the Comptroller a separate request for authorization to issue a multiple points of use certificate for each transaction in which the buyer intends to use a multiple points of use certificate.

    (c) Be authorized by the Comptroller to issue a multiple points of use certificate; and

    (d) Deliver a multiple points of use certificate, in the form and manner required by the Comptroller, to the vendor at or before the time of purchase.

  (2) The Comptroller may deny a buyer’s request for authorization to issue a multiple points of use certificate for reasonable cause, including but not limited to the buyer’s fraud, gross negligence, misuse of a multiple points of use certificate, or delinquency in the payment of undisputed sales and use tax.

C. A buyer who is authorized by the Comptroller may issue a multiple points of use certificate for the purchase of a digital code, digital product, data or information technology service, or software publishing service if, at the time of the purchase, the buyer knows the digital code, digital product, data or information technology service, or software publishing service will be:

  (1) Concurrently available for use by the buyer both in the State and outside of the State; or

  (2) Resold in its original form to at least one related entity for use both inside and outside of the State.

D. Buyer’s Obligation to Pay or Remit Sales and Use Tax.

  (1) Except as provided in §D(2) of this regulation, a buyer who issues a multiple points of use certificate is required to pay or remit the applicable tax to the Comptroller.

  (2) A buyer who issues a multiple points of use certificate with an apportionment determined based on a subsequent resale to a related entity shall:

    (a) Assume or absorb the tax due from the related entity; or

    (b) Remit the tax due from the related entity if the tax is not paid by the related entity.

  (3) A buyer who does not issue a multiple points of use certificate at or before the time of sale, or whose request for authorization to issue a multiple points of use certificate is denied by the Comptroller under §B(2) of this regulation may request a refund for sales and use tax paid on the portion of the digital product, digital code, data or information technology service, or software publishing service used outside of Maryland.

E. Vendor’s Obligation to Collect, Pay, or Remit Sales and Use Tax.

  (1) Except as provided in §E(3) of this regulation, a vendor is relieved of the duty to collect, pay, or remit the sales and use tax on the sale of a digital code, digital product, data or information technology service, or software publishing service if the buyer provides the vendor with a completed, authorized multiple points of use certificate.

  (2) A vendor shall obtain a multiple points of use certificate from the buyer before or at the time the sale is consummated to support each transaction for which a multiple points of use certificate applies.

  (3) A vendor may not accept a multiple points of use certificate at any time, including within the period described in §F, or rely on its acceptance of a multiple points of use certificate to relieve the vendor of the obligation to collect and the sales and remit the sales use tax if the vendor:

    (a) Failed to verify at or before the time of the sale, using the methods provided by the Comptroller, that the buyer was authorized by the Comptroller to issue the certificate;

    (b) Knows or should have known that the sale is not for a digital code, digital product, data or information technology service, or software publishing service; or

    (c) Knows or should have known that the sale is not a sale for use in both the State and outside the State.

F. When the Comptroller notifies a vendor of an intent to assess the tax on a transaction for which the vendor does not possess a multiple points of use certificate, the vendor shall have 60 days from the mailing of the notice to obtain the certificate. If the vendor fails to obtain a proper multiple points of use certificate within the 60-day period, the Comptroller's assessment is final.

G. Apportionment.

  (1) The apportionment must accurately reflect the primary use location in the State.

  (2) A buyer may use any reasonable method of apportionment that is supported by the buyer’s records as they exist at the time of the sale.

  (3) A buyer’s method of apportionment must be:

    (a) Consistent; and

    (b) Uniform.

H. The multiple points of use certificate must state:

  (1) The name of the buyer;

  (2) The tax address of the buyer;

  (3) The Maryland combined registration number of the buyer;

  (4) The name of the vendor;

  (5) The address of the vendor;

  (6) The estimated date of the sale or, for a subscription, the renewal term;

  (7) A general description of the purchase including, for each item in the sale:

    (a) Information sufficient to identify the item as a digital product, digital code, data or information technology service, or software publishing service;

    (b) The estimated taxable price; and

    (c) The percentage of the use allocated to Maryland.

  (8) If the digital code, digital product, data or information technology service, or software publishing service is to be resold in its original form to one or more related entities within the State who are expected to remit the use tax to the Comptroller, the certificate must also state for each entity:

    (a) The name of the related entity;

    (b) The tax address of the related entity;

    (c) The Maryland combined registration number of the related entity; and

    (d) The estimated taxable price of the digital code, digital product, data or information technology service, or software publishing service resold in its original form to the related entity.

#### Regulation .50 Applicable Rate for Data or Information Technology Services and Software Publishing Services.

*COMAR 03.06.01.50*

A. Definitions.

  (1) In this regulation, the following terms have the meaning indicated.

  (2) Terms Defined.

    (a) “Data or information technology service” has the meaning stated in Regulation .48 of this chapter.

    (b) “Software publishing service” has the meaning stated in Regulation .48 of this chapter.

B. Notwithstanding Tax-General Article, §11-104(l)(1), Annotated Code of Maryland regarding the sales and use tax rate for data or information technology services or software publishing services, if a different rate could be applied to a sale or use of tangible personal property, a digital code, a digital product, or a taxable service, the higher rate shall apply to the sale.

### Chapter 02 — General Regulations—Admissions and Amusement Tax

**Authority:** Tax-General Article, §2-103, Annotated Code of Maryland

**Administrative History:** Effective date: January 1, 1990 (16:25 Md. R. 2708)

**Administrative History:** Regulation .05B amended effective January 14, 1999 (26:1 Md. R. 22)

#### Regulation .01 Club Membership.

*COMAR 03.06.02.01*

A. The gross receipts derived from an amount paid to become regularly entitled to the privileges of a club or other organization, as a member or otherwise, do not constitute an admissions and amusement charge subject to the tax, even though one of the privileges is the admission to a clubhouse, club grounds, hall, restaurant, hotel, or other similar place.

B. If the sole privilege of a charge described as “dues” is a right of admission to certain performances or to a particular place on a definite number of occasions, the gross receipts derived from the charges for these privileges are admissions and amusement charges subject to the tax.

C. The gross receipts derived from fees charged club members or nonmembers for the use of a golf course, tennis court, swimming pool, or something similar are subject to the tax if the charges are directly related to the usage of the facility or equipment.

#### Regulation .02 Rental Facilities.

*COMAR 03.06.02.02*

A. Except as provided in §B, below, the receipts derived from the sales of the sole right to use any place or the right to dispose of all the admissions to any place, are not subject to the tax. The person acquiring the right to use the facility is responsible for the payment of the tax on the gross receipts derived from the sale of any taxable admissions.

B. The receipts derived from the use or rental of sporting or recreational facilities, such as a boat or tennis barn, in their entirety are subject to the tax unless the person leasing the facilities will also derive receipts by charging for the use of the same facilities. The lessor of the facilities is not liable for the tax on the lessor's receipts if the lessor can document that the lessee will charge for the use of the facilities and the lessor has notified the Comptroller of the proposed use in the form specified in COMAR 03.06.03.01.

#### Regulation .03 Employees.

*COMAR 03.06.02.03*

A. A person deriving gross receipts from admissions and amusement charges for admission is not liable for the tax on admissions for bona fide employees of the person if the employees receive free admission. If, however, a bona fide employee is admitted at a reduced rate, the person is responsible for the tax imposed on the gross receipts derived from the admission and the additional tax imposed on reduced charge admissions.

B. A “bona fide employee” is a person whose admission to the place is required for the performance of some duty to, or work for, the person deriving the gross receipts.

#### Regulation .04 State Authorized Exemptions.

*COMAR 03.06.02.04*

A. Charitable, Educational, or Religious Exemptions.

  (1) The tax may not be imposed on gross receipts derived from any charge for admission or for merchandise, refreshments, or a service, if the gross receipts are used exclusively for a:

    (a) Charitable, educational, or religious purpose;

    (b) Volunteer fire company or nonprofit rescue squad; or

    (c) Fraternal, service, or veterans organization chartered by a grant of Congress.

  (2) In each instance, in determining whether the “exclusively” requirement is met, ordinary and reasonable expenses of operation, including the costs of merchandise or refreshments provided or sold, may be disregarded. The “exclusively” requirement is not met if any:

    (a) Promoter, concessionaire operator, professional exhibitor, or entertainer is entitled to share in the gross receipts on any form of a percentage basis, including a minimum fee plus a percentage, whether the additional percentage fee is earned.

    (b) Promoter, concessionaire operator, professional exhibitor, or entertainer is to be compensated on any other basis resulting in that individual's receiving substantially all of the gross receipts in excess of bona fide expenses paid to unrelated third parties. If a promoter, concessionaire operator, professional exhibitor, or entertainer is compensated from the gross receipts of an affair, the fact that the amount of money devoted to charitable, educational, or religious purposes is less than the applicable tax shall create a presumption that the “exclusively” requirement has not been met.

    (c) Business promoter receives a substantial business benefit from an affair in the form of advertising, good will, or public acceptance.

  (3) If not disqualified under §A(2)(a)—(c), above, and in the absence of other evidence to the contrary, the Comptroller shall presume that the gross receipts of any organization possessing an effective determination letter from the Internal Revenue Service as to qualification under the Internal Revenue Code, §§501(c)(3), (8), (10), or (19), qualify for exemption.

B. The tax may not be imposed:

  (1) On gross receipts derived from any charge for admission or for merchandise, refreshments, or a service, if the gross receipts are used exclusively for the improvement, maintenance, or operation of an agricultural fair, if the net earnings do not inure to the benefit of any stockholder or member of the association conducting the fair.

  (2) On gross receipts derived from any charge for admission to a concert or theatrical event presented or offered by a not-for-profit group that is organized and operated:

    (a) To present and offer an annual series of scheduled music concerts; or

    (b) For a cultural purpose and receives a grant directly or indirectly from the Maryland State Arts Council.

  (3) On gross receipts derived from the use of bowling alleys or lanes. The tax, however, may apply to the gross receipts of other activities at bowling alleys, including the gross receipts derived from rental of sports equipment, such as bowling shoes, and from coin-operated amusement devices.

  (4) On gross receipts derived from amounts charged for admission to live boxing or wrestling matches. Closed circuit telecasts of live matches taking place within or outside this State are live matches for the purposes of this exemption.

  (5) On gross receipts derived from amounts charged for admissions to, or use of, a charter fishing boat. In order for this exemption to apply, the fishing vessel shall have been hired by and for one specific person or group of people. The charges for admission to or for the use of a vessel which is not the subject of a charter, such as a head boat, do not qualify for the exemption.

  (6) On gross receipts derived from any charge for admission to or use of a facility or equipment in connection with a bingo game that is operated in accordance with Criminal Law Article, §13-507, Annotated Code of Maryland.

  (7) By Baltimore County on gross receipts of a not-for-profit community association that is organized and operated to promote the general welfare of the community that the association serves and the net earnings of which do not inure to the benefit of any stockholder or member of the association.

  (8) By Calvert County, including Chesapeake Beach and North Beach, on gross receipts that are subject to the sales and use tax.

  (9) By Washington County on gross receipts from an amusement device that is subject to the license and permit requirements of Article 24, §11-202, Annotated Code of Maryland.

#### Regulation .05 Locally Authorized Exemptions.

*COMAR 03.06.02.05*

A. A county or incorporated city or town which has authorized the imposition of the tax may enact exemptions from the tax. Legislation specifically authorizing political subdivisions to enact particular exemptions does not limit the authority of political subdivisions to enact exemptions under such terms and conditions as they may see fit.

B. Particular Exemptions Enacted by a County or Incorporated City or Town.

  (1) The tax does not apply to the gross receipts:

    (a) Of nonprofit community associations in Aberdeen, Anne Arundel County, Annapolis, Baltimore City, Calvert County, Howard County, Montgomery County (outside any municipality imposing the tax), Takoma Park, and Talbot County (outside any municipality imposing the tax);

    (b) Derived by nonprofit associations organized to present any of the performing arts from admissions to concerts and theatrical events in Aberdeen, Anne Arundel County, Annapolis, Baltimore City, Gaithersburg, Greenbelt, Montgomery County (outside any municipality imposing the tax), Prince George's County (outside any municipality imposing the tax), and Takoma Park;

    (c) Derived by nonprofit athletic organizations from admissions to athletic events in Anne Arundel County (outside the City of Annapolis);

    (d) On admission charges if the additional tax of 5, 10, or 15 cents on free admission or reduced charge tickets is paid in Cecil County (outside any municipality, except North East, imposing the tax);

    (e) Of a restaurant in Baltimore City and Hagerstown which provides for its patrons entertainment in the form of an individual roving performer who does not employ or is not dependent on amplified sound; and

    (f) Of a nonprofit community swimming pool in Rockville;

    (g) Derived from any activities in Caroline County (outside any municipality imposing the tax);

    (h) Of the Town of Hampstead swimming pool;

    (i) Derived by farmers from school tours of their facilities in Cecil County;

    (j) Derived from Charles County owned and operated facilities;

    (k) Derived from any sporting or athletic event held, sponsored, and operated by the Harford County Public School System or the Aberdeen Board of Parks and Recreation;

    (l) Derived from any City of Gaithersburg municipal government operated or controlled functions, events, or activities, or upon the gross receipts derived from the operations or use of any municipal government facility;

    (m) Derived from amounts charged for admission to a regional, amateur athletic tournament event in Prince George's County (outside any municipality imposing the tax) conducted under the auspices of a recognized amateur or intercollegiate association, excluding events which are part of a regular season schedule;

    (n) Derived from the amounts charged for admission to an event in Prince George's County (outside any municipality imposing the tax) sanctioned by the United States Olympic Committee to select participants in the International Olympics or as part of the United States Olympic Festival;

    (o) Derived from the amounts charged for farm recreational activities in Prince George's County (outside any municipality imposing the tax) which take place on the premises of working farms; and

    (p) Derived from any activity in the Town of Hampstead subject to the sales and use tax.

  (2) The additional tax of 5, 10 or 15 cents on free admissions or reduced charge tickets does not apply in Calvert County (outside any municipality imposing the tax), Hampstead, Perryville, Brunswick, Garrett County (outside any municipality, except Grantsville, imposing the tax), Aberdeen, Howard County, Chestertown, Rock Hall, Montgomery County (outside any municipality, except Chevy Chase (Section No. 4) and Gaithersburg, imposing the tax), Cheverly, Edmonston, Laurel, St. Mary's County (outside Leonardtown), Washington County (outside any municipality, except Boonsboro and Smithsburg, imposing the tax), Wicomico County (outside any municipality, except Fruitland, imposing the tax), and Snow Hill.

### Chapter 03 — Administrative and Procedural Regulations — Sales and Use, and Admissions and Amusement Taxes

**Authority:** Tax-General Article, §§2-102, 2-103, 11-104, and 11-245, Annotated Code of MarylandCh. 203, Acts of 2003

**Administrative History:** Effective date: January 1, 1990 (16:25 Md. R. 2709)

**Administrative History:** Regulation .02 amended effective August 19, 2013 (40:16 Md. R. 1341); March 2, 2026 (53:4 Md. R. 183)

**Administrative History:** Regulation .02D, H amended effective August 21, 2023 (50:16 Md. R. 725)

**Administrative History:** Regulation .03A amended effective October 1, 2003 (30:19 Md. R. 1329)

**Administrative History:** Regulation .03A, C amended effective August 21, 2023 (50:16 Md. R. 725)

**Administrative History:** Regulation .04D amended effective January 14, 1999 (26:1 Md. R. 22)

**Administrative History:** Regulation .05A amended effective January 14, 1999 (26:1 Md. R. 22)

**Administrative History:** Regulation .05A, C amended effective August 19, 2013 (40:16 Md. R. 1341)

**Administrative History:** Regulation .05B amended effective August 31, 1992 (19:17 Md. R. 1606)

**Administrative History:** Regulation .06 repealed and new Regulation .06 adopted effective January 14, 1999 (26:1 Md. R. 22)

**Administrative History:** Regulations .07 and .08 repealed effective August 6, 1990 (17:15 Md. R. 1853)

**Administrative History:** Regulation .09 recodified to be Regulation .07 effective August 20, 1990 (17:16 Md. R. 1990)

**Administrative History:** Regulations .08 and .09 adopted effective December 9, 1991 (18:24 Md. R. 2641)

**Administrative History:** Regulations .08 and .09 repealed effective January 14, 1999 (26:1 Md. R. 22)

#### Regulation .01 Owners, Lessors, and Operators of Places Where Amusements Are Conducted.

*COMAR 03.06.03.01*

A lessor shall give prompt notice to the Comptroller containing the information in §§A—E, below, when a place from which gross receipts subject to the admissions and amusement tax are derived, is rented, hired, or leased by any person:

A. The name and address of the lessee;

B. The character of amusement or entertainment;

C. The theater, park, hall, or similar place giving the name if one is used and known to the public;

D. The date or dates upon which or during which the place of amusement or entertainment is leased; and

E. The name and address of the lessor.

#### Regulation .02 Records.

*COMAR 03.06.03.02*

A. Each taxpayer is required to keep, for a period of 4 years, unless permission is obtained from the Comptroller to destroy the records after a shorter period of time, all records in connection with:

  (1) Sales and purchases; and

  (2) Gross receipts subject to the admissions and amusement tax.

B. The records shall be adequate to distinguish taxable sales, purchases, or gross receipts from nontaxable sales, purchases, or gross receipts. This requires keeping all invoices, bills of lading, purchase orders, sale slips, cash register tapes, meter readings, invoices, contracts, tickets, billing slips, journals, ledgers, inventory records, bank records, and advertising and promotional literature.

C. In the event a vendor elects to assume or absorb all or part of the sales and use tax on any retail sale, the records shall also distinguish sales in which the vendor assumed or absorbed the tax from sales in which the vendor did not assume or absorb the tax.

D. Exempt Sales.

  (1) If sales for resale are made, resale certificates obtained from the purchaser shall be retained. For sales and use tax purposes, if a sale to an exempt purchaser is made, an exemption number issued to the purchaser shall be a part of the sales record.

  (2) For every sale of medical cannabis, as defined in COMAR 03.06.01.47, the qualifying patient or caregiver’s registration number shall be a part of the sales record.

E. Sales to contractors of material to be incorporated into exempt jobs shall be supported by written statements from the contractors, identifying the jobs and certifying that the materials are for incorporation into the jobs.

F. If a sale is subject to a multiple points of use certificate, the certificate and all applicable records obtained from the purchaser shall be retained by the vendor.

G. If a sale is subject to a multiple points of use certificate, the buyer shall retain records as they exist at the time of sale supporting:

  (1) The apportionment reflecting the primary use location in the State; and

  (2) The method of apportionment.

H. The taxpayer is required to make records available for inspection and examination by the Comptroller or authorized representative at any time during business hours.

I. If the taxpayer fails to keep the records required, the Comptroller may compute the taxes due by using a factor that the Comptroller develops by:

  (1) A survey of the business of the person including any available records;

  (2) A survey of other persons engaged in the same or similar business; or

  (3) Other means.

J. The computation of the tax under §I of this regulation is presumptively correct.

#### Regulation .03 Returns.

*COMAR 03.06.03.03*

A. Filing Requirements.

  (1) Sales and Use Tax.

    (a) Subject to §A(1)(b) of this regulation, a person who makes taxable sales or purchases during the course of a month shall file with the Comptroller a report of those sales or purchases, accompanied by payment of the taxes due, by the 20th day of the succeeding calendar month.

    (b) A person who makes retail sales, sales for use, or purchases for use of cannabis, as defined in COMAR 03.06.01.47, during the course of a month shall file a separate report and payment for each physical location in the State at which the person makes retail sales, sales for use, or purchases for use of cannabis.

  (2) A person deriving gross receipts subject to the admissions and amusement tax shall file with the Comptroller a report of those gross receipts, accompanied by payment of the tax due, by the 10th day of the succeeding calendar month.

B. Filing Bases.

  (1) If the Comptroller determines from an application for a license, previous reporting history, or through audit that a taxpayer is expected to remit less than $100 per month in taxes, the Comptroller may assign a filing basis that is less frequent than monthly. Under those circumstances, the Comptroller may also specify a due date other than that specified in §A, above. In addition, vendors who do not normally make taxable sales subject to the sales and use tax or derive gross receipts subject to the admissions and amusement tax in each calendar month may be assigned a seasonal or other irregular filing basis as the Comptroller deems appropriate.

  (2) A person assigned a filing basis which is other than monthly shall notify the Comptroller whenever the person has reason to believe that future tax payment obligations will average more than $100 per month.

  (3) A person assigned a filing basis which is less frequent than four times per year, shall file with the Comptroller a supplemental return for any month other than the month or months for which scheduled returns are due, in which taxes due for that month exceed $100. This return, which is due by the due date set forth in §A, above, shall also encompass any previously unreported taxes accrued since the person's most recently filed return. Filing of this return does not affect a person's liability to file the next scheduled return.

C. The Comptroller shall mail appropriate returns to registrants who request them well in advance of due dates. The failure to receive a return from the Comptroller does not, however, alter a person's obligation to file on time. A person who has not received a return from the Comptroller far enough in advance of the due date to avoid a late filing shall request an additional form from the Comptroller or file a signed schedule providing the information normally required on a return, together with the taxes due, on or before the due date.

D. A person registered with the Comptroller for sales and use tax purposes and admissions and amusement tax purposes shall file returns in accordance with that person's filing schedule, even if taxes are not due.

E. Late Charges.

  (1) Statutory late charges are applicable to a person who files a return without payment in full or after the due date specified for the return.

  (2) The Comptroller is authorized to abate late charges for cause shown. The Comptroller shall consider a record of timely filing of returns as cause shown for abating late charges on one occurrence during any 12-month period, absent evidence of other noncompliance during this period. Abatements shall be made by the Comptroller without a request if qualification can be determined on an automated basis.

  (3) A person whose late charges have been waived on the basis of a previous record of timely filing is expected to take whatever steps are necessary to file subsequent returns on time. A second abatement of late charges during any 12-month period may not be authorized in the absence of a clear showing of cause relating to that return alone. The fact that late charges might have been abated on the first late return, for reasons other than a previous good filing record, is not relevant to this determination.

#### Regulation .04 Refunds of Admissions and Amusement Tax.

*COMAR 03.06.03.04*

A. A taxpayer who has erroneously paid more admissions and amusement taxes, penalty, or interest than properly and legally payable may apply to the Comptroller for a refund on a form available from the Comptroller.

B. The Comptroller shall deny any request for a refund received more than 3 years after the tax or other charges for which the refund is requested were paid to the Comptroller by the taxpayer requesting the refund.

C. The Comptroller shall pay interest on the refund from the 45th day after the claim is filed, in the manner required by statute, to the date on which the refund is paid, unless the claim for refund is based on an error or mistake of the claimant not attributable to the State or a unit of the State government.

D. A person may appeal a denial of a refund by applying for a hearing. The hearing process is governed by COMAR 03.01.01.04.

#### Regulation .05 Refunds of Sales and Use Tax.

*COMAR 03.06.03.05*

A. General.

  (1) The Comptroller shall treat any request for a credit as a request for a refund.

  (2) The Comptroller shall deny any request for a refund received more than 4 years after the tax was paid by the applicant to the Comptroller or to a licensed tax collector.

  (3) If the request for a refund is for taxes previously paid with a return, and from which a collection discount was deducted by the person making the request, the Comptroller:

    (a) If the entire amount of the taxes previously paid with a return was subject to the collection discount, shall deduct from the approved amount the amount of the collection discount; or

    (b) If the entire amount of the taxes previously paid with a return was not subject to the collection discount:

      (i) Shall deduct from the approved amount the amount of the collection discount if, after excluding the approved amount from the total amount of tax previously paid with the return, the taxpayer would not exceed the collection discount limitation; or

      (ii) May not deduct from the approved amount the amount of the collection discount if, after excluding the approved amount from the total amount of tax previously paid with the return, the taxpayer would still exceed the collection discount limitation.

  (4) The Comptroller shall pay interest on the refund from the 45th day after the claim is filed, in the manner required by statute, to the date on which the refund is paid, unless the claim for refund is based on an error or mistake of the claimant not attributable to the State or a unit of State government.

  (5) For sales and use tax assessments made after June 30, 1989, a credit is authorized for tax overpayments for the periods covered by the assessments. The credit will be permitted during the course of the audit to the extent that it can be verified at that time. In all other instances, taxpayers should file a documented claim for a refund identifying the assessment claim to which the refund relates.

  (6) A person may appeal a denial of a refund by applying for a hearing. The hearing process is governed by COMAR 03.01.01.04.

B. Special Provisions for Licensed Taxpayers.

  (1) Refunds Up to $1,000.

    (a) A licensed taxpayer who is entitled to a refund of not more than $1,000, but not to exceed the amount of tax to be paid with a current return, may request the refund by deducting the amount requested from the total tax due with any return, in the space provided on the return.

    (b) A licensed taxpayer electing the method in §B(1)(a) of this regulation  shall keep all records and documents relating to and supporting the request for a period of 4 years from the date of the return on which the request was made. If, within 4 years from the date of the return, the Comptroller determines that any portion of the refund taken with the return was improper, a deficiency assessment shall be levied, including penalty and interest, against the taxpayer for the improper amount.

  (2) Refunds in Excess of $1,000.

    (a) A licensed taxpayer who wishes to claim a refund in excess of $1,000, or in excess of the amount to be reported with a return, may not deduct the amount from the return, but may only file a claim for refund.

    (b) If any portion of the claim in §B(2)(a) of this regulation is approved, the Comptroller may either issue a check for the amount approved or credit the licensed taxpayer's account, or do a combination of both. The amount of any credit in a licensed taxpayer's account, up to the amount due with a subsequent return, may be deducted from the taxpayer's remittance enclosed with that return.

  (3) Cancelled and Returned Sales. If a licensed vendor has refunded the purchase price and tax to a customer for a cancelled sale, the vendor may deduct the amount of the purchase price refunded from the total amount reported as taxable sales on a return, and the amount of tax refunded from the total amount reported as tax collected on the return, provided the vendor keeps accurate records of the transaction.

C. Special Provisions for Requests for Refund of Sales and Use Tax Assumed or Absorbed by a Vendor.

  (1) Subject to the provisions of §B of this regulation, a vendor who has assumed or absorbed sales and use tax on a retail sale or use may claim a refund of sales and use tax, penalty, or interest erroneously paid in excess of the amount properly and legally payable to the Comptroller.

  (2) Records and documents relating to and supporting the request for refund of assumed or absorbed sales and use tax, penalty, or interest shall:

    (a) Show that sales and use tax was separately stated from the sale price on any record of sale; and

    (b) Conclusively demonstrate that the vendor paid the sales and use tax on behalf of the buyer.

#### Regulation .06 Revocation of Sales and Use Tax Licenses.

*COMAR 03.06.03.06*

A. The Comptroller may deny a license to an applicant, reprimand a licensee, or suspend or revoke a license:

  (1) If the applicant or licensee fraudulently or deceptively obtains or attempts to obtain a license for the applicant or licensee or for another, or fraudulently or deceptively uses a license; or

  (2) For cause.

B. The Comptroller shall schedule a hearing before taking any of the actions described in §A of this regulation. The hearing process is governed by COMAR 03.01.01.04.

#### Regulation .07 Bad Debts.

*COMAR 03.06.03.07*

A. A vendor is required to remit the sales and use tax on an accrual basis. If a vendor is unable to collect accounts receivable on which the sales and use tax has been remitted, a credit may be taken or refund applied for within 4 years of the vendor's payment of the tax.

B. Vendors that are required to file federal income tax returns may claim a credit or refund only for the amount of tax that is uncollected on accounts that have been written off for federal income tax purposes.

C. Vendors shall apply partial payments from buyers proportionately to uncollected principal, interest, and tax at the time of receipt. The amount of credit or refund may not be computed on any basis that results in partial payments being disproportionately applied to unpaid principal or interest.

D. The amount of the credit or refund for repossessed merchandise shall be computed on the basis of the difference between the unpaid balance and the value of the merchandise at the time of the repossession.

E. Vendors may take credits for bad debts directly by reducing otherwise reportable taxable sales and tax collections on returns. Since these credits are treated as reductions of tax collections and not as refunds, they may not be reported as refunds on returns and are not subject to the dollar limitations generally applicable to refunds claimed on returns. Bad debt credits taken on returns may not exceed the net tax due.

F. Vendors who take credits for bad debts on returns shall maintain complete and accurate records to support the credits for a period of 4 years. If, within 4 years from the date of the return, the Comptroller determines that any portion of the credit taken was improper, a deficiency assessment plus late charges shall be levied for the underpayment.

G. Vendors who recover amounts previously claimed as bad debt credits or refunds shall report these recoveries on their next sales and use tax report by increasing reportable taxable sales and tax collections by the amount recovered.