I am a government contractor. Am I entitled to an exemption on my purchases of materials and supplies?

Yes and no. If you are purchasing materials that will be incorporated into the realty of a federal, state, or local government agency, you are not entitled to an exemption from the sales and use tax. You should pay the tax to your suppliers at the time of purchase. However, if you are purchasing merchandise for resale in its original form to a governmental entity, you may obtain a sales and use tax license that will enable you to issue resale certificates to your vendors. Equipment and tools purchased for your use in fulfilling a contract is taxable even if ownership will pass to the governmental entity after use.

For more information, see Business Tax Tip #18, Real Property Contractors and Maryland Taxes.