New Maine Tax Changes

On June 12, Governor Baldacci signed into law “An Act to Implement Tax Relief and Tax Reform”. The Act announces changes in the state’s tax code, replacing Maine’s current individual tax rate structure, personal exemptions and itemized deductions with a 6.5% flat tax. The new rates will be effective for tax years beginning on or after January 1, 2010 and would include a surcharge of .35% for Maine taxable income that exceeds $250,000. Therefore, the maximum rate for taxpayers with Maine income in excess of $250,000 is 6.85%, rather than the current maximum rate of 8.5%.

Along with new income tax changes, there are revenue raising provisions that may impact companies in the construction industry:

• The lease or rental of tangible personal property will be subject to sales tax in Maine. Currently, lessees of personal property are not subject to sales tax on lease payments. Effective January 1, 2010, lessors will be required to collect sales tax on rent and lease payments. This will include lease payments for construction equipment.
• Installation, maintenance and repair services will be subject to sales tax in Maine. Currently, only the property furnished in connection with the installation or repair service is subject to sale tax. Effective January 1, 2010, the service component, the installation or repair service will also be subject to sales tax. This will apply to the repair and maintenance of most construction and transportation equipment. However, there will be an exemption for the repair or maintenance of a truck or trailer registered in the name of a business as a commercial motor vehicle.

Noticeably absent from the final version of the bill is the proposed increase in the real estate transfer tax on home sales of $500,000. This provision was included in the original bill, but was eliminated from the final version.
If you have any questions about how the Act affects your company, please let us know. We would be glad to review your situation and help you to determine the impact of these new provisions.