Maine Tax Law Blog

Legislature Increases Oversight of Maine Revenue's Sales and Use Tax Policy Changes

Over the years, taxpayers have complained about enforcement initiatives or statutory interpretations implemented by Maine Revenue Services in the sales and use tax area that create revenue but have not been subjected to the legislative process.  The Legislature has responded to this by creating more legislative oversight. 

Before implementing a significant change in policy, practice or interpretation of the sales and use tax law that would result in additional revenue, Maine Revenue Services must now consult with the Attorney General to determine if the change should be reviewed by the appropriate legislative committee.  The committee may then schedule a time for review and discussion of the proposed change.

Tax Committee Review of Maine Revenue Sales and Use Tax Policy Changes - LD 590, An Act to Codify the Review Practice of Certain Changes in the Application of the Sales and Use Tax Law – Public Law 2011, Chapter 503

New Tree Growth Tax Law Compliance Initiatives Enacted

Maine’s tree growth tax law, which provides for current use taxation of land used for commercial forestry, came under much legislative scrutiny this year.  Two new laws were enacted to deal with this topic, Chapters 618 and 619.

Chapter 618 imposes additional restrictions to be satisfied by owners seeking to classify their property under the Maine Tree Growth Tax Law.  Beginning August 1, 2012, when asked to provide evidence of compliance with a forest management and harvest plan, a landowner will be required to attest that the property is being used to grow trees to be harvested for commercial use or for other allowable purposes.  The Act creates a multi-step process for notifying a landowner of failure to comply with the Law, and imposes new penalties for such failure.  Property eligible for Tree Growth classification under the Law will now be reduced if it has a structure on it or if it is in a shoreland area. 

Chapter 618 also amends the Farm and Open Space Tax Law by creating an additional category for “managed forest open space land,” which is an area of forest for which the owner has submitted a forest management and harvest plan.  Managed forest open space is eligible for an additional 10 percent reduction in value under the alternative valuation method.

Chapter 619 tasks the Director of the Bureau of Forestry with conducting periodic random sampling of land enrolled under the Maine Tree Growth Tax law to ensure compliance with forest management and harvest plans.  Furthermore, upon request by a municipal assessor or the State Tax Assessor, the Director of the Bureau of Forestry also must provide assistance in evaluating whether a forest management and harvest plan satisfies the statutory requirements and whether a landowner’s harvesting complies with his or her plan. 

Tree Growth Tax Law Compliance - LD 1138, An Act to Amend the Maine Tree Growth Tax Law and the Open Space Tax Law – Public Law 2011, Chapter 618;  LD 1470, An Act to Evaluate the Harvesting of Timber on Land Taxed under the Maine Tree Growth Tax Law – Public Law 2011, Chapter 619

 

"Tax Zapper" Software Outlawed in Maine

So-called “tax zapper” software has become a major problem in other states and countries.  To combat this new form of tax evasion, Maine's Legislature has created a new tax crime related to “automated sales suppression devices” and “phantom-ware,” which are software programs that falsify electronic sales records, often through cash registers, to reduce a company’s tax obligations.  The possession, purchase, or ownership of an automated sales suppression device or phantom-ware is a Class D crime.  The manufacture, sale, installation or transfer of these programs is a Class C crime. 

Tax-Zapper Crime - LD 1764, An Act to Reduce High-Technology Tax Evasion and Theft – Public Law 2011, Chapter 526

New Maine Use Tax Amnesty Program Coming

A new Maine Use Tax Amnesty Program was enacted this week.

Under the newly created program, a taxpayer will be absolved from use tax liability, civil penalties, and criminal prosecution with respect to use tax incurred before January 1, 2012, if the taxpayer:

Comes forward between October 1, 2012, and November 30, 2012;

Fully and accurately reports the taxpayer’s proper use tax liability for the years 2006 through 2011; and 

Pays the use tax liability for the three years between 2006 and 2011 in which the use tax liability is highest.  The use tax liability for the three years between 2006 and 2011 in which use tax is lowest, as well as years before 2006, need not be paid. 

The tax liability for the three highest years must be paid before November 30, 2012.  However, the assessor is authorized to enter into an installment arrangement as long as the tax is fully paid by May 31, 2013. 

If a taxpayer would prefer to come forward before October 1, the assessor may, but is not required to, compromise the use tax liability on the same terms as under the amnesty program. 

If a taxpayer fails to timely pay use tax, Maine Revenue may impose civil penalties and the Attorney General may criminally prosecute under certain circumstances. 

What is Maine Use Tax?

Maine use tax is a substitute for Maine sales tax for property that is used in Maine but for which no sales tax has been paid.  Use tax applies to both businesses and individuals and is imposed at the same rate as sales tax.   Many of the exemptions that apply to sales tax also apply to use tax.  Examples of situations that give rise to Maine use tax are:

• Taxpayer purchases a refrigerator at a store in New Hampshire (or other non-sales tax state) but uses it Maine.
• Taxpayer purchases office supplies over the internet for use in Maine, and the internet retailer does not collect Maine sales tax.
• Taxpayer purchases jewelry from a mail order catalogue, and the catalogue retailer does not collect Maine sales tax.
• Taxpayer purchases artwork in another state for delivery to Maine.  No tax is paid in the state of purchase because of an exemption or exclusion from tax for items delivered to another state.
• Taxpayer purchases inventory tax-free for resale in Maine, but withdraws items from inventory for the taxpayer’s own use.

Opportunity for Out-of-State Retailers with Maine Nexus Concerns

Out of state retailers who may have established nexus in Maine but have not yet registered to report and collect tax have a window of opportunity – from October 1 through November 30, 2012 --  to do so at low cost, under the 2012 Maine Use Tax Compliance Program described below. 

Note that this program does not cover income taxes, so that if a retailer conducts activities that are not protected by PL 86-272 it may wish to consider seeking a voluntary disclosure arrangement (VDA) to cover income tax liabilities. 

Please call Sarah Beard or Jon Block if you would like assistance or for more information. 

JBlock@pierceatwood.com

SBeard@PIerceatwood.com