What taxes apply to a new small business?

Taxes Applicable to a New Small Business in Maryland

Starting a small business in Maryland involves understanding and managing several key tax obligations. Proper tax planning supports compliance and smooth operations.

State Taxes for Small Businesses in Maryland

• Maryland Income Tax: Businesses operating in Maryland must pay state income tax. The tax rate depends on the business structure (e.g., sole proprietorship, LLC, corporation). Pass-through entities report income on personal returns, while corporations file separate returns.
• Sales and Use Tax: If your business sells tangible goods or certain services, you must collect and remit Maryland sales tax, currently at 6%. Register for a sales tax license with the Comptroller of Maryland before starting sales.
• Employer Withholding Tax: If you hire employees, you are required to withhold Maryland state income tax from their wages and remit it regularly to the state.
• Unemployment Insurance Tax: Employers pay unemployment insurance taxes to the Maryland Department of Labor based on wages paid to employees. Register as an employer before hiring.
• Personal Property Tax: Maryland counties may impose a personal property tax on business assets. Check with your local jurisdiction for specific requirements and rates.

Federal Tax Considerations

• Federal Income Tax: Register your business with the IRS and obtain an Employer Identification Number (EIN). Your federal tax obligations depend on business type and income.
• Payroll Taxes: If you have employees, you must withhold and pay Social Security, Medicare, and federal income taxes, along with employer contributions.

Operational Tips for Managing Taxes

• Register Early: Obtain all necessary tax registrations, including state sales tax and employer accounts, before conducting business activities.
• Maintain Accurate Records: Keep detailed bookkeeping of sales, expenses, payroll, and tax filings to ensure compliance and simplify reporting.
• Use Automation Tools: Employ accounting and payroll software to automate tax calculations and filings, reducing errors and saving time.
• Stay Updated: Tax laws and rates may change. As of 2026, verify current rates and requirements with the Maryland Comptroller and Department of Labor websites.