COMAR 03.06.01.21 — § 21 Time of Collection.

.21 Time of Collection.
A.
A sale is a transaction for the present or future transfer of title or possession of tangible personal property, a digital code, or a digital product or for the performance of taxable services, for a consideration, and the tax imposed on a retail sale applies when the transaction is entered into, regardless of when the consideration is to be paid, the tangible personal property, digital code, or digital product is to be delivered, or the services are to be performed. Except as provided by this regulation or for a rental, lease, subscription, or license for use, the vendor shall collect the tax from the buyer when the sale occurs.
B.
Exception for Certain Credit or Installment Sales.
(1)
If a vendor makes a credit or installment sale of tangible personal property, taxable services, digital codes, or digital products which the vendor must manufacture, design, create, custom-alter, or order from a third party, collection of the tax may be deferred at the option of the vendor until the property, digital code, digital product, or taxable service is delivered. Among other things, this exception does not apply to a sale, such as a lay-away sale, when delivery of existing property in the possession of the vendor is delayed pending full payment.
(2)
The vendor may not defer collection of the tax beyond the time of full payment for or delivery of the property, taxable service, digital code, or digital product, whichever occurs first. A vendor obligated to make more than one delivery as a result of a single sale of property, services, digital codes, or digital products which the vendor must manufacture, design, create, custom-alter, or order from a third party may defer collection of the tax on the portion of the price attributable to each delivery until payment of that portion of the price or the date of that delivery, whichever occurs first.
(3)
If a sale as to which a vendor has elected to defer collection of the tax is cancelled and, for any reason, less than the full amount of any payment is returned to the buyer, the vendor shall allocate the amount retained as between taxable price and tax and remit that tax with the next return to the Comptroller.
(4)
The authority to defer collection of the tax created by this section does not affect the nature or amount of the vendor's or buyer's liability as created at the time of entering into a transaction but only affects the time of collection of the tax.
(a)
If a change in the tax rate occurs between the time of sale and the time of delivery of tangible personal property, a digital code, a digital product, or a taxable service, the original tax rate shall apply.
(b)
If the sale of the tangible personal property, digital code, digital product, or service is not taxable at the time the sale occurs, the sale does not become taxable if the tangible personal property, digital code, digital product, or service becomes taxable after the sale but before the items or services are delivered.
(c)
If the sale of the tangible personal property, digital code, digital product, or service is taxable at the time the sale occurs, the sale is taxable even if the tangible personal property, digital code, digital product, or service would not be taxable at the time the items or services are delivered.
(5)
Examples.
(a)
Example 1. A contract for the sale of tangible personal property is entered into on June 10. The contract states the property is to be delivered July 10, and requires a single payment due by August 10. Effective July 1 the same year, the rate of sales and use tax on the tangible personal property increases from 5 percent to 6 percent. The vendor is required to collect the tax on the transaction at the 5 percent rate that is in effect on June 10. The tax must be collected no later than the delivery date, July 10.
(b)
Example 2. A contract for the sale of tangible personal property is entered into on June 10. The contract states the property is to be delivered July 10 and requires a single payment due by August 10. Effective July 1 the same year, the tangible personal property is exempt from the sales and use tax. The vendor is required to collect the tax on the transaction at the rate that was in effect on June 10. The tax must be collected no later than the delivery date, July 10.
(c)
Example 3a. A contract for the sale of computer systems integration design consulting services is entered into on January 1, 2025. Services are to be delivered over a negotiated period of 5 years, from March 1, 2025, through February 28, 2030. The contract states the total price for the services is $5,000,000 to be paid in installments upon completion of milestones as defined by the contract. At the time of sale, computer systems integration design consulting is a nontaxable service. Computer systems integration design consulting becomes taxable effective July 1, 2025. Although some installment payments are made after the change in the taxability of the service, taxability for this contract is determined as of the date of sale, which is January 1, 2025. Because the service was not taxable at the date of sale, no sales and use tax is due on any of the installment payments.
(d)
Example 3b. Assume the facts in Example 3a, except the January 1, 2025 contract also includes an option for additional data or information technology services at a set price and an option for an additional period at a set price. Prior to February 28, 2030, the buyer exercises the rights to the additional services and additional years. Because the terms for the optional additional services and additional period were agreed upon and included in the January 1, 2025 contract, the additional services and additional period retain their status as nontaxable as determined as of the date of sale, which is January 1, 2025.
(e)
Example 3c. The parties from Example 3a effectuate a change order on December 1, 2025, contracting for additional data or information technology services not included in the January 1, 2025 contract. The change order adds $2,500,000 to the contract price and the payment of the $2,500,000 be based on additional milestones not included in the original contract. Although the installment payments made pursuant to the January 1, 2025 contract are not subject to the sales and use tax, the December 1, 2025 change order constitutes a new sale. The new sale is subject to the sales and use tax in effect on the date of sale, which is December 1, 2025. The vendor is required to collect the tax on milestone installment payments made for the services included in the change order.
(f)
Example 4. A contract for a subscription cloud storage service is initially entered into for a period from June 10, 2025 through July 9, 2025. Effective July 1, 2025, the cloud storage service becomes taxable. The subscription contract requires advance payments, gives the subscriber access to the service for a 1-month period, and is renewable thereafter on a monthly basis. Each subscription payment period is considered a separate lease, and thus a separate sale, for the purpose of determining when the tax is to be collected or paid. Because the cloud storage service is not subject to the sales and use tax as of June 10, 2025, no tax is due on the June 10, 2025 through July 9, 2025 subscription payment. Because the cloud storage service becomes subject to the sales and use tax on July 1, 2025, the tax is due on the July 10, 2025, through August 9, 2025, subscription payment and any subsequent monthly subscription payments for continued access.