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Maryland's franchise tax is the public service company franchise tax, and it applies only to utilities: companies engaged in a telephone business in Maryland or in the transmission, distribution, or delivery of electricity or natural gas in the state. The tax is imposed under Tax-General §8-402, which describes it as a tax for the privilege of doing business in Maryland. Most ordinary businesses, including LLCs and corporations outside the utility sector, never pay it.
Maryland's separate financial institution franchise tax under Title 8, Subtitle 2 is terminated for taxable years beginning after December 31, 2000 under §8-202(a)(2), and those institutions now pay the state's corporation income tax instead. The state's assessments and taxation department (SDAT) administers and collects the public service company franchise tax, which is based on gross receipts and delivery volumes rather than net income, so a company can owe it in a year with no profit.
The rate is 2% of gross receipts derived from business in Maryland for both telephone and electric or gas companies under §8-403(a). Electric and gas companies also pay a delivery tax under §8-402.1 on top of that 2%: 0.062 cents per kilowatt-hour of electricity and 0.402 cents per therm of natural gas delivered for final consumption in Maryland, per §8-403(b)(1) and (b)(2).
Under §8-409, a public service company may pass the delivery tax through to customers as a surcharge. Counties, municipal corporations, and nonprofit electric cooperatives are exempt under §8-402(b), along with a public-private partnership formed to generate clean or renewable energy, if at least 30% of the electricity generated is purchased by the public partner and the generating station sits on an eligible clean or renewable energy site.
Who must file Maryland's franchise tax?
Only public service companies file a Maryland franchise tax return. §8-401 defines gross receipts as total operating revenue, and under §8-404 each public service company with gross receipts or deliveries in Maryland must file a return with SDAT, generally due April 15 of the following year, though filers should confirm the current-year date against SDAT's own franchise tax instructions.
Most other businesses owe no Maryland franchise tax, though other states define a franchise tax more broadly. Corporations pay Maryland's corporate income tax under Tax-General §10-105(b), a flat 8.25% of Maryland taxable income apportioned under the single sales factor formula in §10-402.
Governor Moore's fiscal 2026 budget proposal would have lowered the corporate rate to 7.99%, but that reduction was not included in the final version of the Budget Reconciliation and Financing Act of 2025 (HB 352, Chapter 604), so the 8.25% rate remains in effect.
LLCs and S corporations generally pass income through to their owners. A pass-through entity that does not elect Maryland's pass-through entity tax files Form 510, which taxes nonresident members only: 6.50% state tax plus a 2.25% special nonresident tax on nonresident individual and fiduciary members' shares (8.75% combined), and 8.25% on nonresident entity members' shares. Resident members are not taxed at the entity level on Form 510; they report and pay tax on their own Maryland income tax returns instead.
An entity can instead elect Maryland's pass-through entity tax on Form 511, which the Comptroller's Form 511 instructions confirm taxes both resident and nonresident individual and fiduciary members' shares at 8.75% (6.50% state plus 2.25% local) and entity members' shares at 8.25% for tax year 2025. Legislation enacted in the 2026 session (SB 284) delayed a related change to how electing entities calculate tax on resident members' shares to tax years beginning after December 31, 2026, per the Comptroller's May 2026 PTE guidance.
Maryland franchise tax filing requirements
Public service companies report the franchise tax on separate SDAT forms, not on Form 1. The 2024 Franchise Tax Booklet lists the required forms by company type.
Electric and gas companies file:
Form 11 (Public Service Company Franchise Tax Return for electric and gas companies)
Form 29EW (Declaration of Estimated Franchise Tax Worksheet)
Form 29E (Estimated Tax Payment Vouchers, four quarterly installments)
Form 17 (Public Utility Operating Property Return)
Form AT3-74 (Business Tax Credit Form)
Telephone companies file:
Form 11T (Public Service Company Franchise Tax Return for Telephone Companies)
Form 29EW, Form 29E, Form 17, and Form AT3-74
Estimated payments are required when the franchise tax is reasonably expected to exceed $1,000 for the year. The Form 29E vouchers are due April 15, June 15, September 15, and December 15 each year. Form 11 and Form 11T are due April 15 each year, moved from the earlier March 15 date by a 2018 legislative change, and this date cannot be extended; confirm current-year dates against SDAT's franchise tax instructions before filing.
The Form 1 Annual Report and Business Personal Property Return is a separate filing that applies to most business entities, not the franchise tax return. Tax-Property §11-101(a) requires domestic corporations, LLCs, LLPs, LPs, business trusts, statutory trusts, and their foreign equivalents to file it, generally by April 15 each year, though the exact date should be confirmed annually.
The fee under Corporations and Associations §1-203(b)(3)(ii) is $300 for Maryland and foreign corporations, LLCs, LPs, and LLPs, and $0 for non-stock corporations and foreign interstate corporations. Older guidance also lists a $100 rate for Maryland family farms, but SDAT's current fee schedule does not list a separate family-farm category, so confirm this figure before relying on it.
Additional state taxes
Maryland businesses owe other state taxes depending on entity type and activity:
Corporate income tax: 8.25% under §10-105(b)
Pass-through entity tax: 8.75% on individual and fiduciary members' shares under the elective Form 511 return, 8.25% on entity members' shares, or Form 510 rates for nonresident members of non-electing entities
Sales and use tax: 6%, or 9% on alcoholic beverages, per the Comptroller's Business Tax Tip #8
Sales tax on data and IT services: 3% since July 1, 2025 on data processing, computing infrastructure, web hosting, and software publishing services, per the Comptroller's Tax Alert on services
Vehicle excise tax: 6.5% of purchase price for non-rental vehicles since July 1, 2025, per the MVA fee schedule (not independently confirmed against a primary MVA source as of this edit)
Short-term rental tax: 11.5% on passenger car and recreational vehicle rentals, 8% on truck rentals, per Business Tax Tip #8
Employment taxes: unemployment insurance rates of 0.30% to 7.50% on the first $8,500 of wages per employee, per the Maryland Department of Labor
Property taxes: SDAT assesses business personal property, counties set the rates, and businesses with under $20,000 in total original cost statewide need not report, per the current Form 1 instructions
Extensions and amendments
Maryland law generally requires covered domestic and foreign entities to file their annual reports by April 15 each year. SDAT's online extension system grants a 60-day extension, moving the due date to roughly June 15, at no charge; requests must be submitted electronically, since SDAT no longer accepts paper extension requests.
Public service company franchise tax returns (Form 11 and Form 11T) are due April 15, and SDAT's franchise tax materials do not describe an extension for those returns. Form 17 uses the same online extension system as Form 1, but on its own window: requests are typically accepted from December through April 14, and an approved extension moves the due date to June 15; confirm the current year's exact dates with SDAT before relying on them.
For amendments to Form 1, SDAT's Form 1 instructions allow an amended return to correct reporting errors or claim a missed exemption (other than a missed manufacturing exemption) within three years of the date the original return was due. Filers mark the "AMENDED RETURN" checkbox, attach schedules showing the corrected figures, and include payment for any additional tax and interest due. The instructions do not indicate a separate fee.
Simplify your Maryland compliance tracking with Discern
Sorting out which Maryland tax applies to your entity, the public service company franchise tax, the corporate income tax, or the pass-through entity tax, is only part of staying compliant. Businesses with entities in Maryland also owe an annual Form 1 filing, a registered agent on file, and ongoing good standing maintenance, obligations that are easy to lose track of once a company operates in more than one state.
Discern's registered agent services and annual report filing keep those Secretary of State requirements on schedule, and Discern provides franchise tax tracking and notifications so filing dates do not get missed.
For teams managing entities across Maryland and a dozen other states, that same coverage extends to every jurisdiction from one dashboard, with automated deadline tracking for annual reports and registered agent coverage in all 51 jurisdictions.
Frequently asked questions about the Maryland franchise tax
These answers cover the questions multi-entity teams most often raise about Maryland's franchise tax and the annual report that most entities file instead.
Does a Maryland LLC pay franchise tax?
No. Maryland's franchise tax reaches only telephone, electric, and natural gas public service companies. A Maryland LLC files Form 1, generally by April 15, with a $300 fee, and its income generally passes through to members for Maryland income tax purposes, but an eligible LLC may elect to pay Maryland's pass-through entity tax with respect to the distributive or pro rata shares of all members.
Is the Maryland financial institution franchise tax still in effect?
No. Legislation enacted in 2000 ended it for taxable years beginning after December 31, 2000, and banks doing business in Maryland now pay the 8.25% corporation income tax under Title 10 of the Tax-General Article.
What happens if a public service company pays the franchise tax late?
Tax-General §13-701(a) directs the tax collector to assess a penalty not exceeding 10% of the unpaid tax when a person fails to pay when due. Interest also accrues on the unpaid tax at an annual rate the Comptroller sets and publishes each year; check the current published rate before estimating what is owed.
Updated on
2026-09-21
