Maine Revenue Service Sales, Fuel & Special Tax Division
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MAINE REVENUE SERVICE SALES, FUEL & SPECIAL TAX DIVISION A REFERENCE GUIDE TO THE SALES AND USE TAX LAW Prepared by the Sales, Fuel & Special Tax Division December 2020 23rd Edition The information contained in this booklet is intended solely as advice to assist persons in determining and complying with their obligations under Maine tax law. It is written in a less formal style and is aimed to address issues commonly faced by businesses. It is not intended to be all inclusive. References in this guide to “MRS” mean Maine Revenue Services. Statutory references are to Title 36 unless otherwise noted. Taxpayers are responsible for complying with all applicable tax statutes and rules, relevant portions of which are set forth throughout this booklet. Although MRS guidance documents do not have the same legal force and effect as rules, justifiable reliance upon the guidance documents will be considered in mitigation of any penalties for any underpayment of tax due. Requests for information on specific situations are encouraged. They should be in writing, contain full information as to the transaction in question and be directed to: MAINE REVENUE SERVICE SALES, FUEL & SPECIAL TAX DIVISION P.O. BOX 1060 AUGUSTA, MAINE 04332-1060 TEL: (207) 624-9693 www.maine.gov/revenue Printed under appropriation 010-18F-1065-072 Summary of Major Changes from 22nd Edition The SALE PRICE section has been updated to include an explanation and description of the Pesticide Container Fee. This section also notes that motor vehicle oil dealers are no longer required to pay the motor vehicle oil premiums imposed under 10 M.R.S. § 1020(6-A), as of October 3, 2019. The SALES TAX EXEMPTIONS section has been updated to reflect the enactment of three new exemptions: (1) certain nonprofit youth camps; (2) incorporated nonprofit pet food assistance organizations; and (3) certain nonprofit worldwide charitable organizations. TABLE OF CONTENTS Overview.............................................................................. 1 Sale Price............................................................................. 13 Taxable Services................................................................. 29 Service Provider Tax.......................................................... 45 Sales Tax Exemptions....................................................... 65 Responsibilities of the Retailer...................................... 109 Taxpayer Compliance.................................................….. 143 Manufacturing.................................................................... 157 Appendix - Sample Documents Index Page 1 OVERVIEW SALES, USE & SERVICE PROVIDER TAX HISTORY On May 3, 1951, the Governor of the State of Maine approved legislation imposing a sales and use tax at the rate of 2% on retail sales to be effective beginning July 1, 1951. The legislature also provided approximately 22 exemptions and exclusions. Since 1951 many new exemptions and exclusions have been enacted. In total there are well over 100 different sales tax exemptions in addition to the items and services that are excluded from the tax base. The chart at the end of this Overview section summarizes the tax rate and major changes in the tax base over the years. SALES TAX To summarize the sales tax law, one sentence can be quoted from the statute: A tax is imposed on the value of all tangible personal property, products transferred electronically and taxable services sold at retail in this State. [§ 1811(1)] This statement says it all, provided one has a basic understanding of the terms used. The Law contains many definitions to clarify the meanings of various terms found within the statute. The most important of these definitions are “tangible personal property”, “product transferred electronically”, “taxable services”, “sale”, and “retail sale”. TANGIBLE PERSONAL PROPERTY “Tangible personal property” is defined as follows: ...personal property that may be seen, weighed, measured, felt, touched or in any other manner perceived by the senses, but does not include rights and credits, insurance policies, bills of exchange, stocks and bonds and similar evidences of indebtedness or ownership. “Tangible personal property” includes electricity. “Tangible personal property” includes any computer software that is not a custom computer software program. “Tangible personal property” includes any product transferred electronically. [§ 1752(17)] “Custom computer software program” means any computer software that is written or prepared exclusively for a particular customer. “Custom computer software program” does not include a “canned” or prewritten program that is held or exists for a general or repeated sale, lease or license, even if the program was initially developed on a custom basis or for in-house use. An existing prewritten program that has been modified to meet a particular customer's needs is a “custom computer software program” to the extent of the modification, and to the extent that the amount charged for the modification is separately stated. [§ 1752(1-E)] Thus, sales and use tax applies to anything that can be seen, felt and touched. This is easy to visualize in the case of vehicles, appliances, tables and chairs, our clothes, etc. The gray area Page 2 begins with tangible products that are generated as a result of a service being performed for the purchaser, for instance, blueprints by a surveyor, financial statements by an accountant, a will drawn up by a lawyer, etc. A discussion in the area of services is provided later in this guide. PRODUCT TRANSFERRED ELECTRONICALLY “Product transferred electronically” is defined as follows: “Product transferred electronically” means a digital product transferred to the purchaser electronically the sale of which in nondigital physical form would be subject to tax under this Part as a sale of tangible personal property. [§ 1752(9-E)] The sale of a digital product is subject to the general rate of tax if the nondigital physical form would be subject to sales tax. For instance, the sale of digital music, books, magazines, newspapers, and movies are taxable since the sale of a CD, paper-bound book, DVD, and printed magazines and newspapers are taxable. The sale of a digital copy of a publication is taxable provided the publication is downloadable to the subscriber’s electronic device. If the subscriber is allowed only to access and view an online version of the publication and the digital copy may not be downloaded, the subscription is not taxable. When the location where the digital publication is being downloaded is unknown, the subscriber’s billing address determines whether the sale occurs in Maine or not. If the billing address is in Maine, the subscription is treated as taxable. For more information on sourcing sales into the State of Maine, see Title 36, section 1819. TAXABLE SERVICES Sales of services in general are not taxable. However, certain services are specifically subject to sales tax as follows: ❖ Rental of living quarters in a hotel, rooming house, or tourist or trailer camp; ❖ Rental or lease of an automobile; ❖ Rental or lease of a camper trailer or a motor home; ❖ Rental or lease of a pickup truck or van with a gross vehicle weight of less than 26,000 pounds from a person primarily engaged in the business of renting automobiles; ❖ Transmission and distribution of electricity; ❖ Extended service contract on an automobile or truck; and ❖ Prepaid calling service. § 1752(17-B) Other services that are subject to a service provider tax rather than a sales tax include: ❖ Telecommunications services; ❖ Installation, maintenance or repair of telecommunications equipment; ❖ Ancillary services (this term is related to telecommunications services); ❖ Cable and satellite television or radio service; Page 3 ❖ Fabrication services; ❖ Rental of video media and video equipment; and ❖ Rental of furniture, audio media and audio equipment pursuant to a rental-purchase agreement as defined in Title 9-A, section 11-105. § 2552 Once again definitions in the statute play an important role in clarifying these terms which are discussed in the TAXABLE SERVICES and the SERVICE PROVIDER TAX sections of this guide. SALE A sale is defined as: ...any transfer, exchange or barter, in any manner or by any means whatsoever, for a consideration and includes leases and contracts payable by rental or license fees for the right of possession and use, but only when such leases and contracts are deemed by the State Tax Assessor to be in lieu of purchase. [§ 1752(13)] In order for a sale to occur, two things must happen. An item or service must be transferred to another party and that party must pay for it somehow. The most common type of sale occurs by selling property in exchange for cash. However, two people could agree to exchange property without any further cash payment or a person could agree to transfer property in exchange for services rendered. In either case a sale still exists. Installment and layaway sales Sometimes a sale occurs but the purchaser has the transaction financed. For instance, a person may obtain a loan from a bank to purchase an automobile or the person presents a charge card to pay for the purchase. These transactions are sales and are reported as a sale in the month in which the transaction occurs. If the seller of the goods offers its customers the ability to pay over time, the sale is reported in the month in which the goods are transferred to the customer. For instance, on June 20th a hardware store customer purchases a new circular saw, charges the amount to their “store account” and walks away with the saw. The sale is recorded in June. With regards to layaway sales however, the customer is paying over time, but does not receive the goods until the entire transaction has been paid in full. Layaway payments should be considered as “deposits” with the sale occurring in the month in which the final payment is made and the goods are transferred to the customer. For instance, on September 10th a customer places 5 items on layaway to be used as Christmas gifts totaling $200 plus $11 tax, and makes ten weekly payments of $21.10. On November 18th a final payment is received and the goods are transferred to the customer.