Maryland Tax Court has ruled that payments made to terminate a lease are not subject to Maryland sales and use tax under certain conditions.

In order for the termination payment to be exempt the original agreement must be cancelled and a separate termination agreement created between the lessor and lessee. In addition, the property must be returned with the cancellation of the original agreement. (Maryland Tax Court, Citicorp International Communications, Inc. v. Comptroller of the Treasury, February 23, 2004.)

Posted on April 15, 2004