Here's the basis of their position:
From the Annapolis City Code:
11.44.030 Firearms and ammunition--Register of purchasers.
Each person engaged in the business of selling or exchanging any firearms, except shotguns and air and cat rifles, or ammunition, shall keep a register of the name and address of the person purchasing any firearms, cartridges or other ammunition, noting the make, caliber and date of purchase. The register shall be open to the inspection of the police at all times. (Prior code § 17-8)
11.44.040 Firearms and ammunition--Registration of sellers.
Each person engaged in the business of selling or exchanging any kind of firearms or ammunition shall register his name and place of business with the City Clerk. (Prior code § 17-9)
The code applies to persons (defined earlier in the code to include corporations), in the City of Annapolis, engaged in the business of selling . . . ammunition. As SG does not have a physical presence in the City of Annapolis, I doubt the code applies to them. But I don't entirely fault them for intepreting the code broadly and covering their corporate assets.
As noted above, they could have saved themselves a lot of emails if their management had controlled the issue, explained their position, and not responded with "too close to the District of Columbia, . . . in Maryland, . . . MAY NOT BE LEGALLY PURCHASED IN YOUR AREA."
That's their story and their sticking with it.
A week after this occurred I place another ammo order where I accidentally transposed the zip code digits from 21401 to 21140 (Riva, MD). I received the ammo order with the incorrect zip even though it was still addressed to Annapolis. Their system appears to be set up to flag zip codes and not cities.