Maryland Business Property Tax: Some Key Items of Interest for Small Businesses

I had a meeting with an accountant and some financial business advisors. They were all quite informative as we prepared for the upcoming tax season. I’d heard recently from a friend in business that I must be sure to pay my Maryland Business Property Tax. I assured him that my rental property business taxes were paid. I informed him that my mortgage company paid it through my escrow account. He informed me that because you are a Maryland Business you must pay a Business Property Tax just to be in business. I could not believe it.

Annual Business Property Tax Grace Period


I started my business and never once paid this tax in two years. Honestly the first year I really didn’t do much with the business. I had the idea and just did nothing for about a year. I had basically no revenue and no expenses. My friend’s statement to me about the Business Property Tax put me in an awkward position. I thought surely this property tax did not apply to those in business without property. I was informed that the Maryland Property Tax was for all business with or without property. I wondered what would happen and what the penalty would be for not paying the tax for two years. I thought about it a few times after speaking with him later. However, I completely forgot about it in less than a month.


During the 2007 tax season, the Maryland Business Tax was mentioned again at my meeting with the accountants and others. In this case, I met with state officials during a meeting in Baltimore. We were discussing the MBE and DBE differences. The MBE (Minority Business Enterprise Program) and the DBE (Disadvantage Business Program) have a joint application process. We were going over the filling process with the sate. The MBE is a state program. The DBE is a federal program. As a whole, I was learning what is required to complete this lengthy application process. During this meeting I was informed of a 1 year grace period that every business gets from the Maryland Business Property Tax. When you start your business you do not have to pay the Business Property Tax until the following Tax year.


Reason for Maryland Business Property Tax


As we gathered information on getting our various certifications we were given and opportunity to see all the fees associated with starting a business. We were also tax planning with the consideration of the proper corporate structure. When we brought up taxes, a state official reminded us that we must be sure to pay our business property tax. From what I understood at the meeting, this is a tax that every business must pay just to stay in business. If you have a business you must pay the state of Maryland this annual tax on business property.


My question was “What if you don’t have any property”

Department of Labor License and Regulation officials’ response “You still must pay the Tax. This is a business tax levied for you to simply stay in business”


The Way the Maryland Business Property Tax Works


I was amazed that I had not heard of it before now. However, as I learned more about the tax, it appears that everyone that was in business more than 2 years appeared to know about it. The way the process works is that the first year you are in business you do not have to pay the tax. If you start your business in January you have the most benefit from this situation. However if you start your business in December, the very next year you must start paying this business tax.


From my meeting, I gathered that this tax is based upon the amount of business property the company owns. The property could include furniture computers and anything that is of value owned by the business. If there are not many assets owned by the business, the fee still remains roughly $300. So year one in business, you do not pay the tax. Year two in business and every year there after, you must pay the annual tax to the state.


What happens when you do not pay the Maryland Business Tax


If you do not pay the tax, the state will seize funds from your business to pay this tax. The state normally will seize these funds from any return your business will file. If a return is in order, the state will take its money from the return. If the return is not in order the state might have take a tax lien against the business. In the grand scheme of things, it is simply better to pay the business tax when it comes.


In addition, my friend in business let me know that the state in some cases informed the licensing agencies that you have not paid your taxes. This process would not allow you to renew the various licenses required for you to remain in business. He said that not paying the tax is more headache and costly than paying it regularly.


From my understanding, it comes in a colorful envelope. The state made it a colorful envelope to ensure that it gets notices. They also make it obvious to ensure that they get paid.


So be aware of the business property tax. Pay the tax on time and avoid any later trial and tribulation.