Governor Hogan signed the RELIEF Act into law about a week ago. But, the answers to how it’s to be implemented are very slowly rolling in.
There is one area of immediate relief for some small business owners – Sales Tax Credits.
The RELIEF Act has earmarked $200 million to support small businesses with sales tax credits of up to $3,000 per month for three months—for a total of up to $9,000.
This relief will directly help more than 55,000 Maryland small businesses.
How Does the Maryland Sales Tax Credit Work?
The good news is the relief is automatic. All you have to do is timely file your March, April, and May sales tax returns electronically using bFile. If we file your sales tax returns for you, there is nothing else you need to do.
How Much Will My Credit Be?
The credit is calculated on a sliding scale up to $3000 per month.
For example, if you are a business with $100,000 in monthly revenue and collect $6,000 in sales taxes, you only remit $3,000.
If you have $50,000 in monthly revenue and collect $3,000 in sales taxes, you keep all $3,000.
If you collect less than $3,000, the credit is capped at the amount you collect.
Who is Eligible for the RELIEF Act Sales Tax Credit?
To be eligible, you must:
- File a timely return.
- The gross amount of sales and use tax remitted with the return may not exceed $6000.
To be clear, if you collect more than $6000 per month in sales tax, you are not eligible for any of the credit.
When Can I Take Advantage of the Credit?
You can claim the credit for sales tax collected in the months of March, April, and May of 2021. The March return is filed on April 20th.
If you are only required to file returns quarterly, you will claim the March credit on the return you file in April and claim the April and May credits on the return you file in July.
What if My Business Doesn’t Collect Sales Tax? Is There any Relief for Me?
There is no official guidance yet, but $10 million for grants of up to $9,000 has been earmarked for businesses that do not collect sales tax and can demonstrate a need for assistance.
At least 15% of these grants must be distributed to disadvantaged businesses.
Is There Any Other Relief For Small Business in the Act?
Yes, there is.
If you received the $10,000 Maryland Grant last year, it will not be taxable at the state level.
The unfortunate part is that it is holding up the filing of the Maryland Business Returns. We are waiting on a new form – 500LU – that will allow us to subtract the $10,000 from the Maryland Taxable Income.
How About Individuals?
I’m not going to go into that in great detail here, but here are the two biggies:
Economic Stimulus Payments:
These payments will only go to those taxpayers that received the Earned Income Tax Credit on their 2019 Maryland state tax return.
Taxability of Unemployment Benefits:
If you earned less than $75,000 for a single taxpayer or $100,000 filing jointly, you will be able to subtract your unemployment benefits from your Maryland taxable income on Form 502LU.
As with the business 500LU, we are still waiting for the 502LU and cannot file any individual returns that will be allowed the unemployment subtraction.
We will keep you informed as we learn more, especially on the new grants for those of you who do not collect sales tax.