New Law Lowers Maine Income Tax, Expands Sales Tax
June 24, 2009
Recently-enacted legislation makes substantial changes to Maine tax laws. Among the changes, the new law:
- reduces Maine's current top income tax rate of 8.5% to a flat rate of 6.5% for most taxpayers (subject generally to a .35% surcharge on the amount of an individual's income that exceeds $250,000);replaces state income tax deductions and;
- exemptions with new tax credits for most resident taxpayersexpands the sales tax to services not previously taxed;
- increases the sales tax on meals and lodging from 7% to 8.5%; and
- increases the sales tax on short-term automobile rentals from 10% to 12.5%.According to the legislation's proponents, most Maine residents will experience a net tax reduction, with more of the overall tax burden exported to nonresidents.
The sales tax expansion covers, among other things:
- transportation and courier services;
- installation, repair and maintenance services on items such as jewelry, cameras, guns, musical instruments, electronic and mechanical equipment, lawn and garden equipment, computer hardware, office equipment, vehicles and appliances;
- tailoring, dry cleaning and shoe repair services; and
- certain amusement, entertainment and recreation services, including admission fees to movies, concerts, theaters, amusement parks, museums, and exhibition shows, but excluding fees charged by health clubs and fitness centers, as well as admission fees to certain venues and events operated by nonprofit or governmental entities.
Additionally, lessors of tangible personal property generally will be required under this new legislation to collect sales tax up-front on each rental or lease, based on the total anticipated payments under the rental or lease agreement. Previously, taxpayers in the business of renting or leasing tangible personal property paid sales tax only when purchasing such personal property.
If you would like more information on the content of this alert, please contact Christine Burke Worthen, a shareholder and Chair of Eaton Peabody's Tax Practice Group, or Rodney A. Lake.
This alert is provided as general information, and is not a substitute for legal or other professional advice.
