Hiring your first employee in Maryland

What do you have to register for before your first payroll?

Maryland uses one Combined Registration Application that opens your withholding account, your sales and use tax licence and an unemployment account, so most businesses file a single form rather than three. The catch is that the Department of Labor now tells new employers to create the unemployment account directly in its own portal, and its guidance warns you may still need the combined application for the Comptroller's accounts. Treat the two agencies as separate confirmations rather than assuming one submission gave you a live unemployment account. Workers compensation and the coming paid leave programme sit outside it entirely.

Does Maryland require income tax withholding?

Yes. You register with the Comptroller of Maryland, before the first payroll. the state's own guide warns against waiting until withholding payments are due to register.

Maryland withholding is not just state tax. Every Maryland county and Baltimore City levies its own income tax that you collect through the same state return, and the rate is set by the county where the employee LIVES, not where your office or the job site is. For 2026 those county rates run from 2.25% to 3.30%, and the employee's county of residence comes off the exemption certificate you must collect at or before hire. Two people doing identical jobs at identical pay will have different Maryland withholding if they live in different counties.

What unemployment insurance does Maryland charge a new employer?

Maryland does not publish one new employer rate, so the figure depends on your industry. You become a covered employer once you employ at least one person in Maryland. Maryland does not publish one flat new employer rate: the Division says only that it may range from 1.0% to 2.6%, so no single figure is printed here and you should read the rate on the assignment notice the Division sends you. Contributions are owed on the first $8,500 each employee earns, one of the lowest wage bases in the country, so the annual cost per employee is capped low. Construction firms headquartered outside Maryland are a deliberate exception and get the Maryland construction industry average rate.

Do you need workers compensation insurance in Maryland?

Yes, from your first employee. Maryland sets no headcount to reach, so there is no free window before coverage is required.

• every Maryland employer with one or more employees, with few exceptions

Maryland has no headcount grace period: with few exceptions every employer with one or more employees must provide coverage, so the obligation attaches to your first hire. You buy the policy from any licensed carrier or from the state's guaranteed market insurer, and only employers with a net worth of at least $10 million can apply to self-insure. Failing to carry coverage exposes you to a fine of up to $10,000, and if you are a corporation the officers responsible for general management are personally liable for it. Deducting any part of the premium from an employee's wages is a misdemeanour.

How quickly must you report a new hire in Maryland?

Within 20 days of the date of hire, unless you report electronically, in which case twice each month not less than 12 nor more than 16 days apart. Reports go to the Maryland Department of Human Services, Child Support Administration.

Anyone who has to issue a W-2 must report each new hire within 20 days. Employers who report electronically trade the 20 day rule for a stricter rhythm of two transmissions a month. Rehires count as new hires if the person was separated from you for at least 60 consecutive days, which is the step seasonal and on-call employers most often miss. Penalties are small at $20 per month of violation, rising to $500 where employer and employee colluded to avoid reporting.

Does Maryland have paid family leave or state disability insurance?

Maryland's paid family and medical leave programme is law and its first regulations are in force, but NO CONTRIBUTIONS ARE BEING COLLECTED YET. After more than one delay, the current official schedule is that payroll deductions begin in January 2027, the first quarterly payment is due that April, and employees can first claim benefits in January 2028, so the fund is built for a year before it pays out. A total contribution rate has been reaffirmed for 2027, split so the employer may withhold at most half from the employee, but because that rate is not yet in force no rate figure is published here. Employers with fewer than 15 employees counted worldwide remit only half the rate. Rates are reset each November for the following year.

Do you need a sales tax permit in Maryland?

The sales and use tax licence comes out of the same combined application as your withholding account, and the statute is written as a precondition: you must hold the licence before you engage in business as a vendor, not merely before your first return is due. No Comptroller page states a price one way or the other, so no fee is reported rather than guessing it is free. Maryland does pay you a timely filing discount on tax collected, capped per return. Separately, many Maryland businesses also need a trader's licence from the Clerk of the Circuit Court in their county, a different filing with its own charges.

Does a marketplace like Amazon or Etsy handle the tax for you?

Maryland's marketplace facilitator law moves the collection duty onto the platform, so if a facilitator collects Maryland tax on your facilitated sales you do not collect or report those sales at all. The trap is that this only holds if every one of your Maryland sales runs through the marketplace: the moment you also sell direct you must register and collect on the direct sales yourself. Worse, the registration thresholds are measured on your combined activity, so facilitated sales count toward the test that drags your direct sales into the net.

If your sales drop, when can you stop collecting?

We could not find a Comptroller page or statute setting a trailing period for Maryland, meaning a stated stretch of time you remain registered after your sales drop below the threshold, so this is recorded as unknown rather than guessed. What Maryland does have is an affirmative closing step: you file a final return and contact the Comptroller to close the account. Until you do, the account stays open and the Comptroller keeps expecting returns, so a business that quietly stops selling into Maryland can accrue non-filing notices.

Does Maryland charge a tax on revenue rather than profit?

Maryland has no general gross receipts tax on business revenue, so there is no Maryland equivalent of Washington's B&O or Ohio's commercial activity tax to budget for. The one gross revenues tax on the books is a narrow digital advertising tax that only reaches companies with at least $100 million of global annual revenue, so it does not touch small and mid-sized businesses. Maryland businesses instead pay corporate or pass-through income tax on profit.

Do you have to register your out-of-state company in Maryland?

$100 for a foreign LLC registration and $100 for a foreign corporation qualification, both stated on the forms themselves. Expedited review adds $50, same-day rush is considerably more, and paying through the state business portal adds a percentage service fee. A $200 late penalty applies on top if the entity already did business in Maryland before registering.

Both filings must arrive with written proof of existence from your home state, generally a certificate of good standing issued within the last 60 days, so order that early. The expensive trap is on the form itself: it asks whether the entity has already done business in Maryland before registering, and answering yes requires a $200 penalty payment with the filing. Non-expedited review can take four to six weeks, so pay the expedite fee if a hire or a contract is waiting on it.

Where these figures come from

Every number on this page was read on Maryland's own agency pages, its statute, or a current-year official form, and this record was last reviewed on 2026-09-08. Where a state's explainer page disagreed with its statute or its current form, we followed the statute or the form and said so in the relevant section, because a state's consumer-facing pages are often the last thing updated when a figure changes.

Anything we could not confirm on a primary source is left blank rather than estimated. A missing figure on this page means we could not verify it, not that it is zero.

This is general information, not legal or tax advice. Rules change and your circumstances matter. Confirm anything you are about to act on with the agency named beside it.