Maine's sales and use tax system contributes significantly to the state's revenue structure while reflecting the unique economic and policy priorities of this northeastern state. With specific rates, exemptions, and special provisions that distinguish it from other New England states, Maine's sales tax framework creates certain obligations for businesses and considerations for consumers. This article covers the essential aspects of Maine sales tax that residents, visitors, and business operators should understand.
Maine's current sales tax rate
Maine imposes a general statewide sales tax rate of 5.5% on most retail sales of tangible personal property and certain services. This base rate has remained stable since October 2013, when it increased from 5.0% as part of a broader tax reform package.
Like many New England states, Maine does not authorize counties or municipalities to impose additional local sales taxes. This creates a straightforward compliance environment with a uniform statewide rate, simplifying matters for businesses operating across multiple locations within the state.
Special tax rates for specific purchases
While most taxable transactions in Maine are subject to the standard 5.5% rate, certain categories of purchases face different tax rates:
8% rate
- Prepared food and alcoholic beverages sold in establishments
- Liquor sold in licensed establishments
9% rate
- Short-term rentals of living quarters such as hotel rooms, vacation rentals, and bed and breakfasts
- This rate applies to the first 28 days of a rental, after which the rental may become exempt
10% rate
- Short-term rentals of automobiles
- This higher rate applies to rental periods of less than one year
These differential rates typically target discretionary spending and tourism-related purchases, helping Maine capture revenue from its substantial visitor population while maintaining a moderate rate on everyday purchases by residents.
What items and services are taxable in Maine?
Maine taxes the retail sale, lease, or rental of tangible personal property unless specifically exempted. Taxable items include:
- Furniture and home furnishings
- Electronics and appliances
- Clothing and footwear
- Restaurant meals and prepared foods
- Motor vehicles and watercraft
- Building materials and supplies
- Household goods
Additionally, Maine taxes specific services including:
- Rental of living quarters (hotels, motels, vacation rentals)
- Rental of automobiles
- Fabrication services
- Certain digital products and services
- Prepaid calling arrangements
- Extended warranties on automobiles and household appliances
Key exemptions from Maine sales tax
Maine provides numerous exemptions from sales tax, reflecting policy priorities around necessities, healthcare, education, and certain industries. Some of the most significant exemptions include:
Food and grocery exemptions
- Grocery staples (unprepared food products)
- Prescription medications
- Prosthetic devices and medical equipment
- Diabetic supplies
Other consumer exemptions
- Home heating oil, wood pellets, and other heating fuels
- Residential electricity (first 750 kilowatt hours per month)
- Residential water services
- Newspapers and periodicals issued at average intervals not exceeding 3 months
Industry-specific exemptions
- Manufacturing machinery and equipment
- Products used in agricultural production
- Fishing vessels, nets, traps, and bait
- Certain watercraft and materials for watercraft
- Machinery and equipment used in research and development
Organizational exemptions
- Sales to governmental agencies
- Sales to qualified nonprofit organizations
- Sales to educational institutions
- Sales to hospitals and nursing homes
Maine's use tax explained
Like other states with sales tax, Maine imposes a complementary use tax at the same rate as the sales tax. The use tax applies when:
- Items are purchased outside Maine for use in the state and no sales tax was collected, or tax was collected at a lower rate than Maine's
- Items are purchased online or through catalogs and the seller did not collect Maine sales tax
Maine residents can report use tax on their state income tax returns or file a separate use tax return. The state has traditionally had stronger use tax compliance than many other states due to an alternative calculation option that allows taxpayers to pay a percentage of their income as estimated use tax.
Special considerations for vacation and second homes
Given Maine's status as a vacation destination with many seasonal residents, there are special tax considerations related to vacation properties:
- Materials purchased for incorporation into a new house may be subject to sales or use tax even if installed by a contractor
- Furnishings and appliances for second homes are fully taxable
- Rental of vacation properties is subject to the 9% lodging tax
- Property management services may have different tax treatments depending on the specific services provided
Business requirements for collecting Maine sales tax
Businesses with sales tax obligations in Maine must:
Registration requirements
- Register with Maine Revenue Services
- Obtain a Sales Tax Registration Certificate
- Registration is available online through the Maine Revenue Services website
Filing and payment obligations
- File sales tax returns monthly, quarterly, or semi-annually depending on tax liability:
- Monthly: When tax liability exceeds $600 per month
- Quarterly: When tax liability is between 100and600 per month
- Semi-annually: When tax liability is less than $100 per month
- Returns are generally due by the 15th day of the month following the reporting period
- Electronic filing is mandatory for certain businesses through the Maine Revenue Services portal
Record keeping requirements
- Maintain complete records of all sales transactions for at least six years
- Retain exemption certificates for exempt sales
- Document the proper collection of sales tax at different rates
The service provider tax
Maine has a somewhat unique approach to taxing services through its Service Provider Tax, which applies to certain services at the same 5.5% rate as the general sales tax. This tax applies to:
- Cable and satellite television and radio services
- Fabrication services
- Rental of video media and equipment
- Rental of furniture, audio equipment, and home electronics
- Telecommunications services
- Installation, maintenance, and repair of telecommunications equipment
- Private nonmedical institution services
- Community support services for persons with mental health diagnoses
- Home support services
- Ancillary telecommunications services
The Service Provider Tax is technically separate from sales tax but functions similarly from the consumer's perspective.
Remote seller and marketplace requirements
Following the Supreme Court's 2018 South Dakota v. Wayfair decision, Maine updated its laws regarding remote sellers:
- Remote sellers with over $100,000 in gross revenue from Maine sales or 200 or more separate transactions in the state must register, collect, and remit sales tax
- Marketplace facilitators (like Amazon, eBay, and Etsy) must collect and remit sales tax on behalf of third-party sellers using their platforms
- Marketplace sellers may need to register but can be relieved of collection requirements for sales made through compliant marketplaces
Casual sales and special events
Maine has specific provisions for casual sales (occasional sales by non-retailers) and sales at special events:
Casual sales
- Generally exempt from sales tax unless they involve more than two retail sales in a 12-month period
- Exception: Casual sales of motor vehicles, watercraft, aircraft, trailers, campers, and livestock are taxable even if sold by a non-retailer
Special event vendors
- Sellers at fairs, festivals, craft shows, and similar events must register and collect sales tax
- Temporary registrations are available for out-of-state vendors
- Event promoters may need to provide information to Maine Revenue Services about participating vendors
Navigating Maine's sales tax during tourist season
Maine's population swells significantly during summer months, creating unique sales tax considerations:
- Seasonal businesses must ensure proper compliance during their active months
- Different tax rates apply to common tourist purchases (lodging, prepared food, rental cars)
- Businesses may need to educate out-of-state customers about tax obligations, particularly for large purchases that might be delivered to other states
Comparison with neighboring states
Maine's sales tax approach differs from its neighbors in several ways:
- New Hampshire: Has no sales tax, creating cross-border shopping incentives for Maine residents
- Massachusetts: Imposes a 6.25% rate with broader exemptions for clothing
- Vermont: Charges 6% with some local option taxes in certain municipalities
- Canada (New Brunswick): Neighboring Canadian province imposes a 15% harmonized sales tax
These differences can influence consumer behavior, particularly in border communities where residents may choose to shop in neighboring states for certain purchases.
Recent developments and future trends
Maine's sales tax system has evolved in recent years:
- Expansion of the tax base to include certain digital products and streaming services
- Implementation of economic nexus provisions for remote sellers
- Marketplace facilitator legislation
- Continued debate about potential local option taxes for municipalities
Discussions continue about potential reforms to the state's tax structure, including proposals to:
- Broaden the sales tax base to include more services
- Adjust rates to remain competitive with neighboring states
- Address tourism impact through targeted taxes
- Create revenue sharing mechanisms with municipalities
Resources for Maine sales tax assistance
Those seeking help with Maine sales tax matters can utilize these resources:
- Maine Revenue Services: Provides forms, publications, and guidance
- Business Answer Line: Offers telephone assistance for tax-related questions
- Taxpayer Advocate: Helps resolve complex or ongoing tax issues
- Sales Tax Instructional Bulletins: Detailed guidance on specific industries and situations