Business Income Tax Filing Information

Business taxpayers will find important information about filing Business Income Tax for Corporations, Pass-through entities and sole proprietorships. Follow the links below for detailed information.

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Filing the Corporation Income Tax Return

Every Maryland corporation must file a corporation income tax return, using Form 500, even if the corporation has no taxable income or is inactive.

Corporation income tax returns can be filed electronically, using approved software. Talk to your software provider about electronic filing options.

Every other corporation that is subject to Maryland income tax law and has income or losses attributable to sources within Maryland must also file Form 500.

Corporations operating in Maryland and in one or more other states are subject to Maryland income tax if their Maryland activity exceeds the provisions for federal protection from state taxation. 15 U.S.C. Section 381 (P.L. 86-272) of the Interstate Commerce Act (P.L. 86-272) prescribes the extent of business activity required before states may impose income taxes.

A Multi-state corporation that operates in Maryland but is not subject to the Maryland income tax is not required to file, although a return reflecting an apportionment factor of zero may be filed for record purposes. We cannot accept letters sent in lieu of filing.

All financial institutions formerly subject to the financial institution franchise tax are subject to corporation income tax and have special apportionment rules. For more information, see Regulation 03.04.08 on COMAR Online.

Use FEIN

Remember to enter your federal employer identification number (FEIN) on the Maryland corporation tax return and other forms.

Use Activity Code

Be sure to enter the business activity code number on Form 500.

Correspondence

Indicate the following on all correspondence and payments:

  • Corporate name
  • FEIN
  • Tax type
  • Tax year

Every corporation that reasonably expects its Maryland taxable income to develop a tax in excess of $1,000 for the tax year or period must make estimated income tax payments with Form 500D-Maryland Declaration of Estimated Corporation Income Tax.

If the corporation is required to make multiple payments it will use Form 500D for each of the additional payments. The Comptroller of Maryland has discontinued the use of Form 500DP.

Do not use this form to remit estimated tax for Form 510 or to remit employer withholding tax.

The total Maryland estimated tax payments must be at least 90% of the tax developed for the current tax year or 110% of the tax developed for the prior tax year. At least 25% of the total estimated tax must be remitted by each of the four installment due dates.

The annualization method for calculating estimated tax is not permitted for corporations. In the case of a short tax period the total estimated tax payment required is the same as for a regular tax year: 90% of the tax developed for the current (short) tax year or 110% of the tax developed for the prior tax year. The minimum estimated tax for each of the installment due dates is the total estimated tax required divided by the number of installment due dates occurring during the short tax year.

Computing the Apportionment Factor

Multi-state corporations are corporations that operate in more than one state and beyond the protection of 15 U.S.C. Section 381 (P.L. 86-272) of the Interstate Commerce Act. Multi-state corporations operating in Maryland as a unitary business must allocate income using an apportionment formula.

Unistate corporations are those that operate in only one state, or operate in more than one state but the extent of the activity in the other states is within the protection of 15 U.S.C. Section 381 (P.L. 86-272). Unistate corporations subject to the Maryland income tax law may not apportion income.

Allocation means the assignment of income to a particular state. Apportionment means the allocation of income among the states by the use of a formula containing apportionment factors. For more information regarding the computation of apportionment factors, see Administrative Release No. 2: Interstate Commerce Act - Domestic and Foreign Corporations - Nexus Requirements - Apportionment of Corporate Net Income and Maryland Tax Regulation 03.04.03.

Updated November 25, 2019

Maryland Law and Regulation on Out of State Vendors

Under Maryland law, a person who engages in the business of an out-of-state vendor must register with the Maryland Comptroller, collect and pay sales and use tax, and file Maryland sales and use tax returns. 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 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 or a taxable service;
  3. Enters the state on a regular basis to provide service or repair for tangible personal property;
  4. Regularly uses the person's vehicles to sell or deliver tangible personal property or a taxable service for use in the State; or
  5. Sells tangible personal property 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:
    1. The person's gross revenue from the sale of tangible personal property or taxable services delivered in the State exceeds $100,000; or
    2. The person sold tangible personal property or taxable services for delivery into the State in 200 or more separate transactions.

See Md. Code Ann., Tax-Gen. §§ 11-701(b)(2)(i)-(b)(2)(iii) and COMAR 03.06.01.33(B)(4)-(5).

Engaging in the Business of an Out-of-State Vendor

The Comptroller's Office interprets Section 11-701(b) as broadly as is permitted under the United States Constitution.

The Comptroller considers the phrase "on a regular basis" as used in § 11-701(b)(2)(ii) to be met if a vendor, such as a furniture or appliance dealer, provides such service or repair as a customary, usual or normal course of business.

Section 11-701(b)(2)(ii) does not define the word "service" in the phrase "provide service or repair for tangible personal property." The Comptroller's Office, relying on a dictionary definition of "service," interprets the word to mean "installation, maintenance, or repairs provided or guaranteed by a dealer or manufacturer." See, for example, the American Heritage Dictionary, Second College Edition (1985).

A dealer or manufacturer that regularly installs, or who performs maintenance for, tangible personal property such as furniture or appliances is engaged in the business of an out-of-state vendor within the meaning of Section 11-701(b)(2)(iii).

No minimum number of service or repair visits is required to meet the definition. If it is the vendor's policy to provide service or repair for tangible personal property, and the vendor in fact provides such services or repairs during the audit period, these services or repairs will be regarded as regular. On the other hand, any services or repairs that are provided on a discretionary and infrequent basis will not be regarded as regular.

The Comptroller's Office will examine all relevant information in making a determination about whether a person engages in the business of an out-of-state vendor under § 11-701(b)(1-4). This information includes advertising materials, promotional literature, websites, representations made to prospective customers before sale, whether the vendor routinely employs service or repair personnel or regularly contracts for such services or repairs, and the vendor's description of its business operations as contained in business documents and submissions to government agencies.

Sales of Tangible Personal Property or Taxable Services for Delivery into Maryland

The nexus requirements contained in COMAR 03.06.01.33(B)(5) became effective October 1, 2018. Out-of-state vendors with more than $100,000 in sales or at least 200 separate transactions into Maryland must register and collect sales tax. The Comptroller's Office has published guidance for out-of-state vendors to determine if registration is required.

Guidance on Sales of Tangible Personal Property or Taxable Services for Delivery into Maryland

Sales and Use Tax Alert - Issued September 2018

Registration

If you are required to register with the Maryland Comptroller's Office, a Maryland Combined Registration Application can be found here.

One-Time Events or Shows

If you are going to participate in a one-time event or craft show involving the sale of tangible personal property in Maryland, you may not need to register with Maryland. However, you will need to obtain a Temporary Sales & Use Tax License. Information on obtaining a Temporary Sales & Use Tax License can be found here.

Closing a Sales and Use Tax Account

If you have determined that you no longer have nexus with the State of Maryland, are not required to file Maryland sales and use tax returns, and do not need to retain your account to claim a resale exemption, you can close your Maryland sales and use tax account by filing the Maryland Sales and Use Tax Final Return Form. Form 202FR is available here.

Contact Us

If you have any questions on Maryland's law and regulations on out-of-state vendors, please contact the Comptroller's Office at remotesellers@marylandtaxes.gov.

When to File

Form 500 must be filed by the 15th day of the fourth month following the close of the taxable year or period, or by the original due date required for filing the federal return.

Corporations and organizations that are allowed later due dates for federal returns under the Internal Revenue Code are allowed the same due date for Maryland income tax returns.

If you are unable to file Form 500 by the due date, you can request a filing extension using Form 500E, Application for Extension of Time to File Corporation Income Tax Return. You can request an extension online if you have previously filed Form 500 and have no estimated balance due on Line 5 of Form 500E.

Pass-through entities unable to file Form 510 by the due date can request a filing extension using Form 510E, Application for Extension of Time to File Pass-Through Entity Income Tax Return. You can request an extension online if you have previously filed Form 510 and have no estimated balance due on Line 5 of Form 510E.

A seven-month extension can be granted for corporations using Form 500E and S corporations using Form 510E, Application for Extension of Time to File Pass-Through Entity Income Tax Return. A six-month extension can be granted for partnerships, limited liability companies and business trusts using Form 510E. In no case can an extension be granted for more than seven months beyond the original due date.

The application extends only the time allowed to file the annual income tax return and not the time allowed to pay the tax.

A request for an extension of time to file will be automatically granted and will not be acknowledged, provided that:

  • The application is properly filed and submitted by the 15th day of the fourth month following the close of the tax year or period, or by the original due date required for filing of the federal return; and
  • Full payment of any balance due is submitted with the application.

For more information about corporation income tax extensions, see Administrative Release No. 4, Extension of Time for Filing Maryland Individual, Corporation, Partnership, Limited Liability Company, Fiduciary Income Tax Returns, and Estate Tax Returns.

Every Maryland pass-through entity must file a return on Form 510, even if it has no income or the entity is inactive. Every other pass-through entity that is subject to Maryland income tax law must also file on Form 510.

A multi-state pass-through entity that operates in Maryland, but is not subject to the Maryland income tax law is not required to file, although a return reflecting no income allocable to Maryland may be filed for record purposes. Letters in lieu of filing will not be accepted.

Qualified Sub-S Subsidiaries are treated as divisions under the Internal Revenue Code and are not considered as separate entities for Maryland purposes. These divisions will be included on the parent company's annual Maryland return.

Maryland will follow the IRS rules for a single member LLC electing to be disregarded as a separate entity ("check the box") and certain partnerships that do not actively conduct a business that have elected not to be treated as a partnership.

The filing of Form 510 and the payment by the pass-through entity of the Nonresident Member Tax does not eliminate the requirement that all nonresident and resident members of the pass-through entity must file the applicable Maryland income return. The nonresident member can claim a credit for the amount of tax paid by the pass-through entity that is attributable to that nonresident member's share of the pass-through entity's nonresident taxable income.

When the nonresident member tax that is due is expected to exceed $1,000 for the tax year or period, the pass-through entity must file Maryland Form 510D, Pass-Through Entity Declaration of Estimated Tax, and make quarterly estimated payments.

For more detailed information, including information on certain nonresident members that are exempt, see Administrative Release No. 6, Taxation of Pass-Through Entities Having Nonresident Members. See also Md. Code Ann., Tax-Gen. §§ 10-102.1 and C.O.M.A.R. 03.04.07.

  • Be sure to include your federal employer identification number (FEIN) and taxable year beginning and ending dates on all forms and payments.
  • Entities claiming business tax credits must complete Form 500CR.
  • Nonresident partners and shareholders must file a nonresident return, Form 505. Credit may be claimed on the nonresident return for any tax paid on behalf of the nonresident by the pass-through entity.
  • Certain investment partnerships are not subject to the nonresident tax. See the specific instructions for line 4 on Form 510.

Sole Proprietorships

For federal purposes sole proprietors file Schedule C-EZ, Profit or loss from Business with their personal tax return Form 1040. Sole proprietor farmers file Schedule F, Profit or Loss from Farming. If you are a sole proprietor in Maryland you would file the same as an individual using Form 502. Your net profit or less is combined on the return with your other income and deductions and taxed using individual tax rates.

Sole proprietors generally do not have taxes withheld from their income so they usually make quarterly estimated tax payments. The Maryland form to submit quarterly estimated tax payments is Form PV.

Filing information for sole proprietors may be found under Sole Proprietorships or in the Filing Information section under Individuals Income Tax section. For federal information on sole proprietors see IRS web site.

Business Income Tax Forms

File Yourself!

There are several ways you can file your business income tax returns on paper or electronically. Please review the links at the bottom of the page, and choose the filing method that best fits your needs.

...Or You Can Use Independent Computer Software Products

You can file both your Maryland and federal tax returns online using approved software on your personal computer.

...Or You Can Use a Professional Tax Preparer

You can choose among a host of professional tax preparers in Maryland who can file your return electronically for you. While we cannot endorse any specific professional, we offer a list of e-file providers for businesses for your convenience.

County Abbreviation
Allegany AL
Anne Arundel AA
Baltimore County BL
Baltimore City BC
Calvert CV
Caroline CL
Carroll CR
Cecil CC
Charles CH
Dorchester DR
Frederick FR
Garrett GR
Harford HR
Howard HW
Kent KN
Montgomery MG
Prince George's PG
Queen Anne's QA
St. Mary's SM
Somerset SS
Talbot TB
Washington WH
Wicomico WC
Worcester WR

Electronic filing is the fastest way to file your business tax return. Electronic filing also allows you to pay your business taxes by direct debit. There are several ways you can file your business tax returns and reports online.

File Electronically Using Online bFile

You can file your Maryland employer withholding tax returns (Form MW506) and sales and use tax returns for free online, using bFile, if you meet the requirements below. The service applies to filing periods in the current year and two back years.

Requirements for Using bFile

You may use bFile to file employer withholding, sales and use tax, and withholding reconciliation returns. Do not send a paper form if you file using bFile.

To use bFile, you need to have:

  • a valid federal employer identification number (FEIN) or Social Security number, AND
  • a Maryland Central Registration Number (your eight-digit Maryland tax account number).

If you have not registered to file Maryland business taxes or do not have a Maryland Central Registration Number, you may register by completing the Maryland Combined Registration Online Application. You will receive the necessary information to file Maryland business taxes approximately one week after submitting your application online.

For system requirements, see bFile Online Service Center General Help

Year End Reconciliation filing through bFile

Employers now have two options to file Form MW508 and W-2 information electronically.

  • W-2 Bulk Upload Application - This application will allow employers and payroll providers to upload income tax withholding statements and W-2s electronically without limitation. Click here for information on the required format of the text file. 1099's cannot be uploaded via this method.

OR

File Electronically Through a Tax Preparer

You can also file the following business returns electronically through approved Maryland Online bFile Providers:

  • Sales and use tax returns
  • Employer withholding returns
  • Wage and tax statements (Form W-2)
  • Unemployment insurance reports (Form Maryland Department of Labor/OUI 15/16)

The list of participating tax preparers does not imply an endorsement of any particular preparer.

Find the Correct Forms

File and submit your payments using the correct tax forms.

Follow the Mailing Instructions and please make sure you complete the name and address area on your form.

Filing Your Taxes in Person

You may submit your paper tax forms and payments, or get assistance in person at any of our local branch offices. Assistance is available 8:30 a.m. - 4:30 p.m., Monday through Friday.

If there is no balance due, businesses may file employer withholding or sales and use tax reports by telephone. Have the tax report with you when you call 410-260-7225. This line is available 24 hours a day, seven days a week.