What is Maryland's franchise tax?

Maryland's franchise tax primarily affects public service companies, including electric, gas, telephone, and telegraph utilities. If you run a typical business, this tax won't touch you at all.

For utilities that do pay it, Maryland bases this tax on a flat percentage of gross receipts. The State Department of Assessments and Taxation (SDAT) handles this tax, not the Comptroller's office. Since this tax targets gross receipts rather than profit, utilities must pay even during unprofitable years. 

Who must file Maryland’s franchise tax?

Maryland's franchise tax only hits one type of business: public service companies. If you deliver electricity, natural gas, telephone, or telegraph service inside Maryland, you owe this tax to the State Department of Assessments and Taxation (SDAT). 

Everyone else pays different taxes entirely. Regular C corporations skip franchise tax completely and pay Maryland's flat 8.25 percent corporate income tax on state-apportioned income instead. LLCs and S corporations also avoid franchise tax, as both operate as pass-through entities by default. 

Exceptions and special cases

If you're not operating a public utility, you're not subject to Maryland's franchise tax. The state designed this specifically for public service companies, calculated at 2% of their Maryland gross receipts.

Everyone else gets carved out. Regular C corporations pay Maryland's flat 8.25% corporate income tax, while many other businesses, such as manufacturers, retailers, and tech companies, are organized as pass-through entities.

Additional state taxes

Beyond the franchise tax, Maryland businesses face several other tax obligations that vary by entity type and business activities. This includes:

• Corporate income tax
• Pass-through entity tax
• Sales and use tax
• Vehicle excise tax
• Short-term rental tax
• Employment taxes
• Property taxes

Discern automates your compliance obligations in Maryland and beyond

Maryland's franchise tax deadlines, sales tax obligations, annual report requirements, and corporate income tax filings across multiple states create an endless compliance shuffle that spreadsheets struggle to track effectively. 

While Discern can't help you file Maryland’s franchise tax, our system covers annual business filings for all 51 jurisdictions, plus deadline tracking and automatic notifications for Maryland tax obligations. Ready to streamline multi-state compliance? Discover how Discern handles business filings and deadline management across all jurisdictions.