Retailers and the Bag Law

What is the carryout bag law and when did it start?

Montgomery County Law 8-11, the Carryout Bag Law, went into effect January 1, 2012 and requires all retail establishments in the County that sell goods and provide their customers a carryout bag (either paper or plastic) to carry their purchases out of the store charge 5-cents per bag.  The customer is not charged if he/she uses their own bag to carry purchases out of the store. 

What happens when a customer makes a purchase and wants a carryout bag?

The customer is charged at a rate of 5 cents per bag if they want to carry purchases out in a bag (paper or plastic) that the store provides at the point of sale (e.g., checkout counter). The bag charge also applies to purchases made over the phone/Internet/fax when the customer is having the purchase(s) delivered in a bag provided by the store. Cashiers are encouraged to ask whether a bag is needed before bagging their purchases. 

What about self-service check out transactions?

Retailers must program self-service checkout counters to factor in the carryout bag law charge.

Can customers avoid the bag charge?

Yes. Customers may bring their own bags to carry out purchases. 

Are there any requirements for the bags that retailers hand out?

No. Retailers may continue to provide their customers any type of bag. However, they must charge customers for the bag at a rate of 5-cents per bag. 

Is there a requirement to provide a customer credit program for bags that the customer voluntarily brings into the store?

No. However, retail establishments may continue voluntarily offering their customers credit for any bags which customers themselves bring to the store to carry out their purchases. -

I own a thrift store or an antique store and give out once-used bags that are turned in by patrons.  Am I required to charge the 5 cent tax on this?

Once-used bags such as those given out at thrift and antique stores are subject to the County's bag tax if they are paper or plastic and are given out at the checkout counter to customers to carry out purchases.

Do I charge customers for carryout bags if they pay for food purchases with food stamps?

There are no exemptions in the Montgomery County Carryout Bag Law for customers making food stamp purchases (such as EBT card or a WIC coupon). Rules governing food stamps usually prohibit the purchase of non-food items such as bags using the coupon. If the customer takes carryout bags then the bag must be rung up separately, because according to the Montgomery County bag law, bag tax transactions must be itemized.

Who must collect and remit to the County the 5-cent charge for carryout bags?

Retail establishments in Montgomery County must collect and remit the charge.  These establishments include all stores, service stations, grocery stores, department stores and other sellers with retail outlets.   To help defray the costs of tracking, reporting and submitting bag charges to the County, retailers retain 1 out of every 5 cents collected per bag.

What is the County doing with the money collected from the carryout bag law?

Money collected will be deposited into the County's Water Quality Protection Charge fund. Revenues will be dedicated to fighting litter and pollution in Montgomery County. 

What are the penalties for violating this law?

A retail establishment that does not comply with the law is subject to fines of $500 for a first offense and $750 for repeat offenses. In addition to the fines, the County may pursue any remittances owed, along with interest and penalties, through its collections procedures; which may involve placing a lien on any property owned by a non-compliant retailer. A retail establishment that does not remit payments when due is liable for interest on the collections at the rate of one percent per month for each month or part of a month after the remittance is due and also a penalty of five percent of the amount of the collections per month or part of a month after the remittance is due, up to 25 percent of the bag tax collected. 

What agency is responsible for enforcing this law?

The Department of Finance is responsible for enforcing retail establishments' compliance with respect to reporting and submission of payments. 

Are any retail establishments exempt from charging for carryout bags?

An "occasional retailer" (defined in the law as "...a retail establishment that engages in the retail sale of goods no more than six days in any calendar year" is exempt from the bag charge requirement. Additionally restaurants/delis and cafeterias are exempt if they provide paper bags. 

Are any bags exempt from the Carryout Bag Law?

Yes. Retailers are not required to charge for the following types of carryout bags:

• Bags used to hold prescription drug(s)
• Bags which are sold for initial use as yard waste bags, pet waste bags, garbage bags, dry cleaning bags, or newspaper bags
• Bags provided by a seasonal stand or street fair stall such as a farmer’s market, yard sale or “occasional retailer” (defined in the law as "...a retail establishment that engages in the retail sale of goods no more than 6 days in a year.")
• Bags used to package a bulk item or to contain or wrap a perishable item
• A paper bag that a restaurant provides to a customer to carry prepared or leftover food or drink from the restaurant 

The bag we provide for customers to carry out their purchases is heavy-duty, thick, and durable and may easily be reused. Is the bag exempt from the law?

No. All carryout bags provided to customers at the point of sale -- irrespective of their size, thickness, or durability -- are subject to the County's bag law and must be charged at the rate of 5 cents per bag. 

Are paper bags used in liquor stores to carry out bottles exempt from the Bag Law?

No. The paper bags given out at check-out counters to carry out bottles are subject to the bag law and must be charged at 5 cents per bag. 

Which plastic bags used by restaurants are exempt from the bag law?

Plastic ziplock bags used by establishments to package prepared foods, typically in the kitchen area, are not considered carryout bags and are exempt. 

If my business does not provide bags to customers, must I file any payment form to be in compliance with the Bag Tax Law?

No. If you are not providing carryout bags to customers in your business, you are not required to register your business on the payment Web site nor file any payment form since your business does not collect any bag taxes to remit. 

Is the bag tax applicable to federal or state government customers?

The bag tax does not apply to state and federal government customers simply because the County has no power to tax the state or the federal government in the absence of a state or federal law authorizing the County to do so.  Individuals making purchases on behalf of a state or federal agency are not required to fill out any particular form.  As long as the individual government employee making the purchase is able to prove to the retailer’s satisfaction that the government, not that individual, is the purchaser, then the bag tax does not apply. 

Are organizations with ‘tax exempt’ status exempt from the bag tax?

Many organizations such as private schools and universities, cemeteries, non-profit organizations, churches and other religious organizations may have some “tax exempt” status. The tax exempt status for organizations simply means that there is a law somewhere on the books that exempts that organization from at least one tax.  However, being exempt from one tax does not mean that the organization is exempt from ALL taxes. With respect to the County’s Bag Tax, neither the organization nor individual customers from the organization are exempt and must be charged for carryout bags used to carry purchases.

Are public schools, universities and libraries subject to the Bag Tax?

• Montgomery County Public Schools or other public school systems are part of the state government, and thus not subject to the Bag Tax. 
• A public university or college (e.g., University of Maryland) is also an arm of the state government, and thereby, not subject to the tax.
• A library that is part of a city or county’s public library system is subject to the bag tax just like any other local government entity. 

Are local governments subject to the bag tax? 
Cities and counties are subject to the bag tax. 

One exemption to the Carryout Bag Tax is reserved for a bag used to package a bulk item or to contain or wrap a perishable item.  If I am selling a perishable item (such as a tub of ice cream or a loaf of bread), do I have to charge the Bag Tax?

When the law refers to bags used to package bulk or perishable items, it is talking about the types of bags that you find in the produce section of the supermarket for customers to bag loose items—e.g, green beans, nuts—or the types of bags that might be used to wrap what is ordered at the deli counter, seafood counter, or fresh meat counter.

If the perishable item is placed in a paper or plastic carryout bag at the checkout counter for the customer the bag is subject to the Bag Tax. The point of sale is the kicker for the bag tax.  With respect to the bag law, the fact that an item is “perishable” is irrelevant if the perishable item is placed in a carryout bag at the checkout counter.  That paper or plastic bag would be subject to the 5 cent tax.

Are government retail stores (e.g., gift stores) exempt from the Bag Tax?

The Bag Tax does not apply to retail establishments owned and operated by the Federal or State government.   A County-owned or municipality-owned retail establishment is required to collect the Bag Tax. 

When do I pay the Carryout Bag Charge?

On or before the 25th day of each month, each retail establishment must remit the full amount collected for all carryout bags provided to a customer during the previous month, at a rate of 4 cents per bag. (Retailers retain 1 cent out of every 5 cents charged for the bags. Counter resets for bags after payment.

Note that retailers with low bag sales volume may pay at any time, but are required to pay after the amount due under this law exceeds $100 (when at least 2,500 bags have been paid for by customers). 

How do I remit payment?

A secure tax payment website ( montgomerycountymd.gov/bagtax) has been set up on the County’s server for submission of bag law revenues. Elements required for payment are retailers' identity information and the total number of bags given out in the reporting period. The following steps are required in the payment submission system:

1. On the secure County tax payment website ( montgomerycountymd.gov/bagtax), set up a user name and password.
2. Set up the retailer’s identity information (federal tax id number or Maryland business license number)
3. Submit the period of payment (e.g., January 2012) and then state the number of carryout bags customers have taken under the Bag Law (e.g, 2,500).
4. The system will calculate the tax for you based on 4 cents per bag (since retailers retain 1 cent).
5. Proceed to the payment system; you can use a direct bank deposit (ACH).

The remittance must be accompanied by a report of all transactions that involve bags subject to the law. The report contains the number of bags supplied or provided to customers and the amount of money collected from carryout bag charges. 

How is the carryout bag charge recorded?

A retail establishment must indicate on the customer's transaction receipt the number of carryout bags that the retail establishment provided to the customer and the total charge levied at a rate of 5 cents per bag. 

What is the official wording that must be displayed on the store receipt?

There is no requirement for specific wording on the customer’s receipt in the Law but the customer’s receipt must show the number of bags and the amount of the tax. The County recommends “Montgomery County Carryout bag charge” or “Carryout bag charge” or “Bag Tax” (as space permits). 

Can a store itemize carryout bags on the customers' sales receipts but not charge their customers?

No. The customer's transaction receipt must indicate both the number of carryout bags provided to the customer and the total amount of money collected for the bags. Also, the law requires the retail establishment to collect the tax from the customer at the time customer pays for the goods.

Can a store credit be used to cover the customers' bag charges?

Yes. A store credit can be used to cover any amount owed by a customer to a retail establishment.

Can the bag law charge be refunded to customers?

A retailer may reimburse the customer for the cost of the tax, however the County will not refund the bag charge. The retailer may not label the refunded bag tax on the customer’s receipt as “bag charge refund” as that is technically not accurate. 

Is the bag tax taxable under State Law?

No. Neither the 4-cent County bag tax remitted to the County nor the 1 cent retained by retail establishments for administrative costs is subject to the State Sales and Use Tax. For further information on this issue, email the State Comptroller at [email protected] or phone 1-800-638-2937. 

When customers pay for purchases and pick up items in the store, how do we collect the $.05 charge since they have already paid? 

Any plastic or paper bag that the retail establishment provides to the customer to carry out the online purchases is subject to the bag tax, and must be rung up at the cash register and recorded as bag taxes. 

If my business does not generate $100 in bag tax revenue during an entire calendar year, am I obligated to pay?

The County’s bag tax law does not require a retail establishment to remit the taxes collected within one calendar year if total collections from the bag tax by that retail establishment do not exceed $100 by the end of that year.  For convenience, we expect most retailers will close out their accounts and taxes due by their own calendar or fiscal year. 

What is the definition of a restaurant in the law?

Restaurant in Montgomery County means "any lunchroom, cafe or other establishment located in a permanent building for the accommodation of the public, equipped with a kitchen containing facilities and utensils for preparing and serving meals to the public, and outfitted with a public dining area.”

• A restaurant does not include any area of a supermarket, department store, or other retail establishment beyond the kitchen and public dining area.
• A restaurant does not include convenience stores, delis, and mini-marts unless they have an eat-in area with tables. (An establishment with raised tables with or without seating where people may stand and eat also counts as a restaurant.)  

Are there any special exemptions from the Bag Law that apply to restaurants?

Yes. Restaurants may not collect the tax from customers for paper bags used to carry out prepared or leftover food or drink. This includes paper bags used to carry out unfinished bottles of wine. If plastic bags are provided, the restaurant must charge the customer 5 cents per bag. If the paper bag used to carry out prepared food items from a restaurant also contains non-prepared food items (e.g., bag of chips, bar of chocolate) the bag is exempt from the bag law (restaurants need not charge for these paper bags).

Bags provided by an establishment that does not have a dining area (e.g., a deli or a pizza shop) would not qualify for the paper bag exemptions afforded to a restaurant. 

What plastic bags used by restaurants are subject to the bag law (@ 5 cents per bag) ?

• Any plastic bag that is used to carry prepared foods
• Any plastic bag or thin film sleeve given out at the establishment’s checkout counter to carry a wrapped food item or food items (such as a sandwich wrapped in wax paper, a plastic tub of soup, a clamshell for prepared foods at a lunch deli, etc.)
• A plastic bag that is used to carry multiple unprepared and/or prepared food items simultaneously 

Which plastic bags used by restaurants are exempt from the bag law?

Plastic ziplock bags used by establishments to package prepared foods, typically in the kitchen area, are not considered carryout bags and are exempt. 

How is the County publicizing the carryout bag law to residents and businesses?

The County is conducting a broad-based public education campaign to inform Montgomery County businesses and residents about the bag law. The County is providing materials to retailers that advertise the bag law for use in stores and at cash registers (such as decals, posters and notices). The County is also conducting a free bag distribution program to lower income households. The goal of the outreach is to help ensure that residents and retailers are fully informed about the law. 

How can I get more information about the law?

From the County website – www.montgomerycountymd.gov/bag or by calling 311.