Maryland Sales Tax Penalties and Interest Checklist
Introduction
Maryland sales tax penalties and interest are additional charges added to unpaid or late sales and use tax obligations. If a business owes sales tax to the state and does not pay on time, the
Comptroller of Maryland automatically applies both penalties and interest to the balance.
Understanding what penalties and interest are, why they accumulate, and how they affect your total tax debt is important because these charges can grow quickly and significantly increase what you owe.
What This Issue Means
Maryland sales tax penalties are automatic charges applied by the state when a sales tax payment is late or a Maryland sales tax return is filed late. The Comptroller assesses a penalty not exceeding 10% of the tax due for late sales tax filing or payment under the Tax-General
Article. Interest on your unpaid Maryland tax is a monthly charge calculated on unpaid tax amounts at a rate equal to one-twelfth of the annual interest rate, and it continues to grow until the balance is paid in full.
Why the State Issued This
Maryland law requires that sales and use tax be collected and remitted on time according to filing due dates established by the Maryland Comptroller’s Office. When a business fails to pay taxes by the payment due date, the Comptroller applies penalties and interest automatically as part of its collection process. These charges serve two purposes: they compensate the state for the delayed use of tax revenue, and they create a financial incentive for taxpayers to file and pay on schedule.
What Happens If This Is Ignored
If penalties and interest notices are ignored, the total amount owed continues to increase because interest accrues monthly on the unpaid balance. The state may escalate collection efforts by sending an assessment letter, placing a tax lien on business or personal property, garnishing wages, or suspending a sales tax permit. The longer the account remains unpaid with overdue taxes, the larger the debt becomes, and collection actions may include legal costs and additional civil penalties.
Step-by-Step Checklist
Step 1: Review the Notice Carefully
Locate and read the entire notice or assessment letter from the Comptroller of Maryland. Write down the notice date, reference number, and the specific amounts listed for tax due, penalties, and interest to understand what you owe.
Step 2: Verify the Tax Liability
Review your business records to confirm whether the original sales and use tax amount is accurate. Check whether the Maryland sales tax return was actually filed late or the payment was actually late by comparing dates on your records.
Step 3: Check Payment History
If you believe you paid the sales tax on time, gather copies of payment confirmations, canceled checks, or bank statements. Submit full documentation showing when the payment was made and received to support your claim with a customer service representative.
Step 4: Confirm Penalty and Interest Calculations
Compare the notice amounts to Maryland’s current rates: a 10% failure-to-file penalty for late filing and monthly interest at one-twelfth of the annual rate. For 2025, the annual interest rate is
11.4825%, resulting in a monthly rate of approximately 0.957% under the Tax-General Article provisions.
Step 5: Note the Response Deadline
The notice will include a deadline for payment or a deadline for requesting a hearing or penalty relief review. Mark this date on your calendar and respond before the deadline to preserve your rights and avoid additional failure-to-pay penalties.
Step 6: Contact the Comptroller
Call the Maryland Comptroller’s Office at 410-260-7980 or 410-767-1300 for sales tax questions. You can also call toll-free at 1-800-638-2937 to confirm what the notice means and your options for resolving the issue with an office representative.
Step 7: Request Penalty Relief If Eligible
Maryland law allows penalty abatement in specific circumstances, such as first-time violations or situations where you made a good-faith effort to comply. Contact the Comptroller to understand whether your tax situation qualifies and what documentation is required for relief from civil penalties.
Step 8: File an Appeal if Disputing
If you dispute the notice, request a hearing or appeal by following the instructions provided on the notice. Submit your request before the deadline and provide all supporting documentation to support your position with the Maryland Comptroller.
Step 9: Explore Payment Plan Options
If you cannot pay the full amount immediately, contact the Comptroller to request a payment agreement. Not all payment plans are automatically approved, but the state does consider requests and may establish a manageable payment schedule for your delinquent tax situation.
- Missing the response deadline: The notice lists a specific date by which you must
- Providing incomplete payment documentation: If you claim you paid the sales and
- Assuming penalties will disappear automatically: Penalties and interest do not expire
- Failing to open follow-up notices: The Maryland Comptroller’s Office typically sends
- Not requesting penalty relief when eligible: If your tax situation qualifies for penalty
- Confusing penalty types: Understanding the difference between civil penalties for
- State tax notice review and response
- Penalty and interest reduction options
- Payroll and trust fund tax assistance
- Payment plan and relief eligibility review
- Representation with state tax agencies
Step 10: Keep Detailed Records
Save copies of all letters you send, notes from phone calls, including dates and representative names, and all notices received. This creates a clear record of your actions and protects you if disputes arise about your compliance efforts or if a tax lien is threatened.
Understanding Interest and Penalty Calculations
The Maryland Comptroller calculates interest and penalty amounts based on statutory formulas established in the Code of Maryland. For failure-to-file or failure-to-pay situations, the penalty is up to 10% of the tax due. Interest on your unpaid Maryland tax accrues monthly from the original payment due date until full payment is received. Taxpayers can use the interest calculator tool available on the Maryland Comptroller’s website to estimate their total tax interest obligations before submitting payment.
Common Mistakes to Avoid respond, and ignoring this deadline can eliminate your right to request a hearing or appeal your case. use tax on time, submit complete documentation, including bank records and confirmation receipts, to avoid delays in the review process. or go away without action, and the account balance grows until it is properly resolved with the Maryland Comptroller. multiple communications, and each notice contains important information and new deadlines that require your immediate attention and response. relief under Maryland law, the relief will not be granted unless you specifically request it
from the Comptroller. administrative violations and criminal penalties for intentional fraud helps you respond appropriately to notices from the Maryland Comptroller’s Office.
Frequently Asked Questions
What is the difference between a penalty and interest?
A penalty is a one-time charge of up to 10% applied for late filing or late payment of sales and use tax. Interest on your unpaid Maryland tax is a monthly charge calculated at one-twelfth of the annual interest rate, which continues to accrue until the balance is paid in full.
How long does Maryland have to collect unpaid sales tax?
Maryland has a 10-year statute of limitations for collecting taxes from the date the taxis due.
However, once a judgment is entered or a property tax lien is filed, it may be enforced or renewed as any other judgment, potentially extending collection indefinitely beyond the 10 years.
Can Maryland penalties be reduced or forgiven?
Under Maryland state law, the Tax-General Article allows penalties to be abated in specific circumstances, such as first-time violations or when the taxpayer made a good-faith effort to comply. Relief is not automatic, and you must request it and provide supporting documentation to the Maryland Comptroller’s Office.
What happens if I cannot afford to pay taxes immediately?
If you cannot pay the full amount, contact the Maryland Comptroller to discuss legal options, including a payment agreement or offer in compromise. Financial hardship situations may qualify for special arrangements, but interest continues to accrue on unpaid balances even during payment plans.
Received a State Tax Notice?
If you’ve received a state tax notice and aren’t sure how to respond, we can help you review your options and next steps.
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