If you are buying a Maryland business’s inventory or a bulk chunk of its assets, the Maryland bulk sales tax rules make you, the buyer, responsible for clearing the seller’s sales and use tax account before the money changes hands. Maryland charges 6% sales and use tax on tangible personal property transferred in a bulk sale, and a buyer who does not notify the Comptroller and withhold any amount the state claims can be held personally liable for every dollar the seller owes, plus interest and penalties. The rules exist because once inventory is sold off in one transaction, the seller can disappear with the proceeds; the state collects from whoever still has the assets.
When the Bulk Transfer Rules Apply
Maryland’s Commercial Law defines a bulk transfer as a transfer in bulk, outside the ordinary course of the seller’s business, of a major part of the materials, supplies, merchandise, or other inventory of an enterprise.1Maryland General Assembly. Maryland Code Commercial Law 6-102 A transfer of a substantial part of the business’s equipment counts too, but only when it accompanies a bulk transfer of inventory. Selling equipment on its own does not trigger the rules.
The line runs between routine daily sales and a one-time divestment. A restaurant serving meals is operating in the ordinary course of business. That same restaurant selling its kitchen equipment, furniture, and remaining food stock to one buyer is a bulk transfer. If your deal looks like the second scenario, the tax notice and withholding steps below apply to you.
Notifying the Comptroller
Maryland’s Tax-General code requires the buyer (or the auctioneer, in an auction sale) to mail notice of the bulk transfer to the Comptroller regardless of whether the seller lists the Comptroller as a creditor and regardless of whether you have any reason to believe the seller owes sales and use tax.2Maryland General Assembly. Maryland Code Tax-General 11-505 – Bulk Transfers This is where buyers most often trip. Even a sworn statement from the seller that nothing is owed to the state does not remove the notice obligation, and it does not protect you if that statement turns out to be wrong.
The notice has to reach the Comptroller at least ten days before you take possession of the goods or pay for them, whichever happens first.3Maryland General Assembly. Maryland Code Commercial Law Title 6 – Section 6-105 Send it by registered or certified mail so you have proof of the date. The notice must state that a bulk transfer is about to happen and give the names and business addresses of both the buyer and seller, along with any other business names the seller has used in the past three years.4Maryland General Assembly. Maryland Code Commercial Law Title 6 – Section 6-107
Before drafting the notice, require the seller to produce a sworn list of all existing creditors, including names, business addresses, and amounts owed where known.5Maryland General Assembly. Maryland Code Commercial Law 6-104 The seller signs and swears to it. A seller who resists giving you that list is telling you something important about the deal.
Withholding on the Comptroller’s Claim
After the Comptroller receives your notice, the office reviews the seller’s account. If the seller owes sales and use tax, the Comptroller files a claim for the amount due, and you must withhold that amount from the proceeds otherwise payable to the seller.2Maryland General Assembly. Maryland Code Tax-General 11-505 – Bulk Transfers Withholding is mandatory. If no claim comes back, the transaction can proceed and funds go through as agreed.
Filing the notice but then ignoring the claim and paying the seller in full is not partial compliance. It carries the same consequence as never filing the notice at all.
What Successor Liability Costs You
Failing to file the § 11-505 notice or failing to withhold the amount the Comptroller claims triggers two consequences at once. All consideration in the bulk transfer becomes subject to a first-priority lien for any sales and use tax the seller owes, and the buyer becomes personally liable for that unpaid tax plus all accrued interest and penalties.6Maryland General Assembly. Maryland Code Tax-General 13-802
The statute does not cap that liability at the purchase price. If the seller owes $80,000 in back taxes, interest, and penalties but you paid $60,000 for the assets, your exposure is the full $80,000. Either failure, notice or withholding, is enough on its own to put you on the hook.6Maryland General Assembly. Maryland Code Tax-General 13-802
How Fast Interest and Penalties Grow
The interest and penalty charges tacked on to an inherited tax bill can rival the tax itself. Maryland’s annual interest rate on unpaid taxes is recalculated each year and set at the greater of a statutory floor (9% for 2023 and each year after) or three percentage points above the average prime rate quoted to large businesses in the prior fiscal year.7Maryland General Assembly. Maryland Code Tax-General 13-604 For calendar year 2025 that formula produced a rate of 11.4825%.8Comptroller of Maryland. Penalty and Interest Charges
Late-payment penalties can reach 25% of the tax owed.8Comptroller of Maryland. Penalty and Interest Charges On a $50,000 balance, a 25% penalty adds $12,500, and one year of interest at roughly 11.5% adds another $5,750. A $50,000 problem becomes a $68,250 problem inside twelve months.
Protecting Yourself at Closing
The full compliance burden sits with the buyer, so treat the notice and withholding requirements as hard closing conditions rather than paperwork you catch up on later.
- Get the sworn creditor list from the seller before you draft anything else. Refusal is a walk-away signal.
- Mail the notice to the Comptroller by certified mail at least ten days before you pay or take possession, whichever comes first.
- Hold the closing proceeds, or a meaningful portion of them, in escrow until the Comptroller’s review period runs out. Maryland law does not set a required escrow percentage, but escrow is the standard practice because it keeps the money reachable if a claim surfaces.
- If a claim arrives, pay the claimed amount to the state out of the withheld funds. Release the rest to the seller only after that is done.
Buyers who pay the seller in full at closing on the strength of the seller’s word are betting their own money that the tax account is clean. The notice, the withholding, and the escrow together cost a little friction at closing and remove a liability that is not capped by anything you agreed to pay.