How to close a restaurant in Maryland follows the same general framework as closing anywhere, but Maryland has specific rules on final paycheck timing, liquor license administration, and sales tax that differ from other states. Here is what Maryland restaurant owners need to know.
Final Paycheck Requirements in Maryland
Maryland law requires that employees receive their final paycheck on or before the next regular payday after termination. If the employee is discharged, the final paycheck is due on the next regular payday. If the employee resigns, the final paycheck is also due on the next regular payday.
Maryland does not require employers to pay out accrued vacation or PTO upon termination unless the employer's written policy promises it. However, if your employee handbook or any written agreement states that unused PTO is paid out at termination, you are legally bound to honor that.
The Maryland Department of Labor (labor.maryland.gov) enforces wage payment laws. Violations can result in penalties of up to three times the unpaid wages plus attorney fees.
Liquor License Rules in Maryland
Maryland liquor licenses are administered by local liquor control boards, not a single state agency. Each county has its own liquor control board with its own procedures. Baltimore City has its own board. Montgomery County, Prince George's County, and other major counties each have separate boards.
This means the rules for surrendering or transferring a license vary by jurisdiction. In general, to surrender a Maryland liquor license, you notify the local liquor control board in writing of your closure date and return the physical license. To transfer a license to a buyer, the buyer must apply to the local board for approval.
Maryland has a quota system for liquor licenses in some jurisdictions, which means licenses in those areas may have secondary market value. In Baltimore City and some suburban counties, a full liquor license can be worth significant money on the secondary market. Check with a local liquor license attorney before surrendering a license in a quota jurisdiction.
Sales Tax Final Return in Maryland
Maryland requires businesses to file a final sales tax return with the Maryland Comptroller (marylandtaxes.gov) when closing. The final return covers the period from your last return through your closure date.
You must also cancel your Maryland sales tax registration. This can be done online through the Comptroller's bFile system or by submitting a written request.
Maryland's sales tax rate is 6 percent on most taxable sales. Food sold for immediate consumption (restaurant meals) is taxable in Maryland. Grocery food is exempt. Restaurants must remit all collected sales taxes before closing.
WARN Act Considerations in Maryland
The federal WARN Act requires employers with 100 or more full-time employees to provide 60 days advance notice before a plant closing or mass layoff. Most independent restaurants in Maryland do not meet this threshold.
Maryland does not have a state-level WARN Act equivalent, so the federal threshold applies. If your restaurant has fewer than 100 full-time employees, you are not subject to WARN Act notice requirements.
LLC Dissolution in Maryland
If you operated your restaurant as a Maryland LLC, you must file Articles of Cancellation with the Maryland State Department of Assessments and Taxation (SDAT) (dat.maryland.gov). The filing fee is $100. You can file online through the Maryland Business Express portal.
Before filing for cancellation, you must pay all outstanding Maryland taxes, including sales tax, payroll taxes, and the annual personal property tax. SDAT will not process the cancellation if there are outstanding tax obligations.
After filing the Articles of Cancellation, your LLC has a winding-up period during which you can settle outstanding debts, distribute remaining assets, and close bank accounts.
Maryland-Specific Closing Checklist
- Notify employees and pay final wages per Maryland timing requirements
- File final Maryland sales tax return and cancel sales tax registration
- Notify local liquor control board of license surrender or transfer
- File final Maryland payroll tax returns with the Comptroller
- File Articles of Cancellation with Maryland SDAT ($100 fee)
- Cancel Maryland business license if applicable
- Notify Maryland Department of Health of food establishment closure
- Cancel Maryland personal property tax registration
Related guides: How to close a restaurant: the complete guide | What happens to employees when a restaurant closes? | Restaurant liquor license: what happens when you close