Maine’s new sales tax exemptions and remote retailer collection requirements

Several notable changes to Maine’s sales and use tax laws took effect during the final months of 2017 and the first month of 2018. They impact remote retailers, sellers of prepared food, diabetic supplies, and more.

As of Nov. 1, 2017, Maine is taxing remote retailers. A person who lacks a physical presence in Maine but makes sales for delivery into the state is now required to register as a retailer if, in the previous or current calendar year, that person makes at least 200 separate transactions in Maine, or that person’s Maine sales exceed $100,000.

This wasn’t an easily made decision. Last June, after the legislature passed LD 1405, An Act to Require Remote Sellers to Collect and Remit Sales and Use Tax on Sales into Maine, Governor Paul LePage vetoed it. He said he preferred to wait for a federal solution, which has long been promised but has yet to materialize. Less patient, the legislature overrode the governor’s veto.

Maine Revenue Services (MRS) invites out-of-state sellers meeting the sales threshold to register with the state. See MRS Instructional Bulletin No. 43 for more details.

Maine legislature has amended LD 1551 to clarify that the equipment and supplies used in the diagnosis and treatment of diabetes is only eligible for a sales tax exemption if it’s used in the diagnosis and treatment of diabetes in humans. Fido’s out of luck as of Nov. 1, 2017.

While most sales of prepared food are taxed at 8%, as of Nov. 1, 2017, sales of prepared food by civic, fraternal, and religious organizations may be exempt. This exemption applies only when the sale occurs at a public or member-only event — unless alcoholic beverages are also sold at the event — and is limited to the first 24 days (non-consecutive) in a calendar year during which such sales are made. If alcohol is also sold, tax must be charged on the prepared food sales.

The exemption does not apply to sales of prepared food made by civic, fraternal, or religious organizations at private functions, such as weddings. It does, however, generally apply to qualifying sales by an auxiliary of such an organization. See MRS Instructional Bulletin No. 27 to learn more about the taxability of prepared food in Maine.

Maine provides a sales tax exemption for the “continuous rental of lodging,” provided the renter does not maintain a primary residence at some other location.

As of Nov. 1, 2017, the definition of “continuous rental” includes a person that rents living quarters for 28 or more consecutive days for employment or education purposes. In this case, the renter is permitted to have a primary residence elsewhere.

For additional information and changes, see MRS Sales, Fuel, and Special Tax Division General Information Bulletin No. 107.

As of Jan. 1, 2018, Maine no longer allows retailers to use a sales tax bracket system to calculate sales and use tax. Instead, it’s using the conventional rounding method, carried to the third decimal place.

Retailers have the option to calculate tax on each individual item when several purchases are made together, or on the total price. However, items taxed at different rates (5.5%, 8%, 9%, or 10%) must be separately totaled. Sales tax rates in Maine are as follows:

• 5% for tangible personal property; digital goods; the rental or lease of an automobile for more than one year; the rental or lease of a camper trailer, motor home, pickup truck or van; prepaid calling arrangements; transmission and distribution of electricity; and extended warranties on automobiles and trucks
• 8% for alcoholic beverages and prepared food
• 9% for rentals of living quarters in a hotel, rooming house, or tourist or trailer camp
• 10% for rentals of automobiles on a short-term basis, pickup trucks or vans with a gross vehicle weight of less than 26,000 pounds by a person primarily in the business of renting automobiles, and loaner vehicles by a motor vehicle dealer (except those provided to service customers pursuant to a manufacturer’s or dealer’s warranty)

As evidenced by its four sales tax rates, Maine sales tax compliance is complicated. Tax automation software makes it more manageable, particularly for retailers selling in multiple states. Learn more.