Maximize Your Savings!
As an engineering research and development company, we understand the importance of staying up-to-date with the latest tax incentives and tax resources for manufacturers in Maryland. Whether you’re a startup or long-established business, taking advantage of these opportunities can provide significant cost savings and help fuel your growth. In this blog, we’ve compiled a comprehensive list of tax resources that may benefit your manufacturing or R&D business in Maryland.
Topics Included:
- Internship Opportunities and Tax Savings
- Manufacturing and R&D Tax Incentives
- Sales and Use Tax Exemptions
Internship Opportunities and Tax Savings
Internships are a win-win for both businesses and students, providing valuable hands-on experience while fostering the development of local talent. Maryland offers several programs and tax incentives to encourage businesses to hire interns.
1. Maryland Technology Internship Program (MTIP)
- The Maryland Technology Internship Program (MTIP) helps Maryland retain top tech talent by increasing the number of paid technical internships offered in the state.
- Businesses can receive financial assistance to hire more interns, with reimbursements of up to $1,800 per intern for one session and $1,200 for a second session.
- Applications are accepted in three sessions: Spring, Summer, and Fall, so be sure to apply early as funding is limited.
2. Intern Unemployment Insurance Exemption
- Internships that combine work experience with academic experience are exempt from paying Unemployment Insurance on top of wages.
- This exemption can save businesses up to 10.5% of the first $8,500 of wages paid to each intern.
- For four interns, that comes to $3,400.00 saved for one summer.
Our annual Internship Program has been a great success, both for us and for our interns. Consider offering internships at your own company to drive growth.
Manufacturing and R&D Tax Incentives
Maryland recognizes the importance of supporting its manufacturing and research & development industries. They’re working to enable these industries by offering various tax incentives to encourage them to grow!
1. Manufacturing and Research & Development Exemption
- Local governments in Maryland are authorized to exempt personal property used in manufacturing or R&D activities from taxation.
- Businesses can apply for the Manufacturing and Research & Development Exemption by September 1st of each year.
2. Buy Maryland Cybersecurity Tax Credit
- The Buy Maryland Cybersecurity Tax Credit Program encourages purchases from Maryland cybersecurity companies by offering buyers up to a 50% tax credit on qualifying expenditures.
- This resource is great, but limited – apply early!
3. Research and Development Tax Credit (R&D)
- Businesses with qualified R&D expenditures in Maryland may be eligible for the R&D Tax Credit, which offers a 10% credit on eligible expenses exceeding the Maryland Base Amount.
- The total statutory cap is $12 million, with a $3.5 million set-aside for small businesses, and a maximum credit of $250,000 per applicant.
- The tax credit will remain in effect until June 30, 2027, when it will be up for extension by the General Assembly.
Sales and Use Tax Exemptions
Maryland offers several sales and use tax exemptions to support businesses engaged in production or research & development activities.
1. Purchases for Resale
- Businesses that purchase materials for resale can obtain a Maryland Sales & Use Resale Certificate to avoid paying sales tax on those purchases.
2. Production Activities and R&D Exemptions
- The Maryland sales and use tax does not apply to sales of tangible personal property used directly and predominantly in production activities or research & development.
- If you’re ever unsure, you can always check the Maryland Tax Code Subsection 11 for more details (or just some light reading!).
Stay informed and take advantage of these tax resources to maximize your savings and support the growth of your manufacturing or R&D business in Maryland. Join our email list, where we deliver the monthly Root3 Rundown; Up-to-date, helpful news and resources straight to your inbox.
References
Learn about these tax credits in more detail with the following links.
See the “Employer’s Quick Reference Guide” issued by the State of Maryland DLLR Division of Unemployment Insurance (dated January 2019) – The following wages are not to be reported:10. Wages earned by an individual who is enrolled in a full-time educational program that combines academic instruction with work experience, which is an integral part of the educational program.
Per I.R.C. § 3306(c)(10)(C) — service performed by an individual who is enrolled at a nonprofit or public educational institution which normally maintains a regular faculty and curriculum and normally has a regularly organized body of students in attendance at the place where its educational activities are carried on as a student in a full-time program, taken for credit at such institution, which combines academic instruction with work experience, if such service is an integral part of such program, and such institution has so certified to the employer, except that this subparagraph shall not apply to service performed in a program established for or on behalf of an employer or group of employers…
See Md. TAX-GENERAL Code Article § 11-210(b)(1) – (b) The sales and use tax does not apply to a sale of: (1) tangible personal property used directly and predominantly in a production activity at any stage of operation on the production activity site from the handling of raw material or components to the movement of the finished product, if the tangible personal property is not installed so that it becomes real property;
See Md. TAX-GENERAL Code Ann. § 11-217 (b) – The sales and use tax does not apply to a sale of tangible personal property, a digital code, or a digital product for use or consumption in research and development.
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