Maine Tax Law Blog

Maine Revenue Proposes New Rule on Rulings

Maine Revenue has just proposed a new rule that, if promulgated, will mark the end of informal rulings in Maine.  http://www.state.me.us/revenue/rules/html/draftrule_110.htm  The New Proposed Rule 110 would impose a host of requirements and conditions for obtaining advisory rulings from Maine Revenue.  In addition, Maine Revenue will no longer issue "blind" rulings if this new rule is promulgated.  The comment deadline for this proposed rule is December 5th. 

Court invalidates Maine Revenue's tax lien in decision that could affect the validity of other tax liens

In a September 25, 2008 decision (Shaefer v. Assessor, 2008 ME 148), the Maine Supreme Court invalidated the Maine State Tax Assessor's tax lien because the Assessor failed to renew the original lien within the 10-year period provided by Statute.  http://www.maine.gov/tools/whatsnew/attach.php?id=61849&an=1 The Assessor's argument that his failure to renew the lien within the 10-year period provided by statute did not invalidate the lien was soundly rejected by a unanimous Court.  This decision may impact other taxpayers where the Assessor failed to renew the tax lien within 10 years after the lien was first filed.  If you have questions about whether your tax lien could be affected by this decision, please contact me.  jblock@pierceatwood.com

Soft Drink and Syrup Tax will Appear on this Fall's Ballot

Maine's Secretary of State has certified that the coalition seeking a People's Veto of the syrup and soft drink tax has submitted more than enough signatures to place the issue on this Fall's ballot.  Maine voters will now have the final say as to whether the new tax on a wide variety of drinks and the ingredients used to make them, intended to fund the Dirigo health program, will ever go into effect.

MAINE REVENUE SUSPENDS SOFT DRINK & SYRUP TAX

By Jonathan A. Block, Esq.

Maine Revenue Services has announced the temporary suspension of the soft drink and syrup tax that had been scheduled to go into effect on August 1st.  The suspension is due to the submission of signatures to the Maine Secretary of State by proponents of a People's Veto effort.  Registrations for soft drink tax collection are not being processed at this time.  If the People's Veto signatures are invalidated, the tax will go into effect the following day, according to Maine Revenue.  If a sufficient number of People's Veto signatures are validated, the veto question will go on the November ballot.  http://www.state.me.us/revenue/othertaxes/softtax/statusupdate.htm

For questions or comments, please contact jblock@pierceatwood.com or rcreamer@pierceatwood.com

State Tax Assessor Expresses Support For Sales and Use Tax Exemption For Instrumentalities of Interstate Commerce

Posted by Rob Creamer

Until recently, certain instrumentalities of interstate commerce, such as buses and trucks that transport cargo and passengers to and from Maine, were able to rely on a provision of Maine’s tax statutes, 36 M.R.S.A. § 1760(41), as exempting them from the State’s sales and use taxes.  According to the plain language of § 1760(41), the purchase and use of certain vehicles, when placed in use as instrumentalities of interstate or foreign commerce within 30 days of their purchase, and used as such not less than 80% of the time for following two years, are exempt from Maine’s sales and use tax. 

In John T.Cyr & Sons v. State Tax Assessor, however, a decision issued this past January, Maine’s Superior Court ruled that the exemption contained in § 1760(41) (available at http://janus.state.me.us/legis/statutes/36/title36sec1760.html) only applies to vehicles that Maine lacks the power to tax under the Commerce Clause of the United States Constitution.  2008 Me. Super. LEXIS 56.  Under this ruling, Maine may tax the sale or use of almost any vehicle entering the State, even if used as an instrumentality of interstate commerce and even if it remains in Maine for only a short period of time.  Download superior_court_decision_and_order_w1093616.PDF

The Cyr decision is currently on appeal to Maine’s Supreme Court, and the State Tax Assessor initially supported the Superior Court’s holding that the exemption found in 36 M.R.S.A. § 1760(41) was limited to those vehicles the State was constitutionally unable to tax.  Download state_tax_assessors_brief_on_stipulated_record_w1093172.PDF

However, in response to an amicus curiae brief filed on behalf of the Maine Motor Transport Association, Inc. by Pierce Atwood, LLP, the Assessor has reversed his position on this point.     Download brief_of_amicus_curiae_w1060345.PDF   In his reply to the amicus curiae brief, the Assessor now states that § 1760(41) should not be so narrowly construed and that the exemption should remain available for vehicles that satisfy the 80% test found in the statutory language.  Download appellees_reply_brief_to_amicus_curiae_w1093143.PDF

It remains to be seen whether the Supreme Court will agree with the Assessor or uphold the Superior Court’s ruling on this issue. 

For more information, please email me at RCreamer@pierceatwood.com.

Maine Revenue May Not Send Correspondence to Taxpayer Representatives

Posted by Rob Creamer

The failure of a revenue agency to send important, time-sensitive notices to a taxpayer’s duly authorized representative is obviously a source of concern for both taxpayers and their representatives.  Unfortunately, Maine Revenue Services (“MRS”) has neglected to send notices to taxpayer representatives, even though the Power of Attorney form (“POA”) completed by the taxpayers directs MRS to do so.  According to MRS, this is due to the inability of their computer system to accommodate sending notices to taxpayer representatives. 

MRS’s response to this issue has been to revise the POA (Form 2848-ME, available at http://mainegov-images.informe.org/revenue/forms/general/Form2848ME_RevApr2008.pdf) to state that although a taxpayer completing the form authorizes MRS to send notices and other communications to the taxpayer’s representative:

This authorization does not require Maine Revenue Services to send notices to the representative; in many circumstances, especially computer generated notices, only the taxpayer may be sent the written communication, not the representative. 

The fact that MRS will not send all notices and communications to taxpayer representatives will obviously make it much more difficult for tax professionals to effectively represent their clients and could cause important deadlines to be missed.  To avoid missing any deadlines or remaining unaware of MRS decisions, tax professionals should warn their clients to forward to them copies of any correspondence they receive from MRS, and routinely check with their clients to make sure that this is happening. 

We expect this troubling issue to lead to discussions among tax professionals and MRS, and possibly to legislation addressing the issue. 

For more information, please email me at RCreamer@pierceatwood.com.

Maine Soft Drink and Syrup Tax

Posted by Rob Creamer

Governor Baldacci recently signed into law P.L. 2007, c. 629, “An Act to Continue Maine’s Leadership in Covering the Uninsured.” To view click here.

Effective August 1, 2008, the Act places a new tax, at the following rates, on the sale in Maine of soft drinks and the materials made to use them:  (1) 42 cents on each gallon of bottled soft drinks; (2) $4.00 on each gallon of syrup used to make soft drinks; and (3) 42 cents on each gallon of soft drinks produced from a powder or base product.  These taxes will be used to fund Dirigo Health, the controversial plan designed to provide universal access to health care for Maine residents.  A coalition spearheaded by the Maine Beverage Association is attempting to gather support for a people’s veto of the Act.  If the coalition can collect some 55,000 signatures in support of the veto, the Act will be put on hold and the question of whether it should go into effect will be placed on this fall’s ballot as a referendum question.  The law also contains increased taxes on beer and wine.

Assuming it becomes effective, the impact of the Act will be larger than its title suggests, because the Legislature has defined a “soft drink” as including more than that term is normally thought to imply:

[A] “Soft Drink” means any nonalcoholic beverage, whether naturally or artificially flavored, whether carbonated or noncarbonated . . . including, but not limited to, soda water, cola, and other flavored drinks, any fruit or vegetable drink containing 10% or less of natural fruit juice or natural vegetable juice and all other drinks and beverages commonly referred to as soft drinks.

Under this definition, flavored water, iced teas and many types of juices will be considered soft drinks.  Coffee and tea will also be considered soft drinks if they are bottled as a liquid for sale.

The tax is imposed on manufacturers, distributors and wholesalers of soft drinks, syrup and powder bases, but the Act does not state at what point in the manufacture or distribution of these products the tax must be collected.  The Act also requires each manufacturer, distributor or wholesaler that sells soft drinks, syrup or powder bases in Maine, or offers these products for sale in Maine, to obtain a license from Maine Revenue Services (“MRS”) for the “privilege of conducting such business within the State.”  Retailers who purchase soft drinks or the syrup or powder for making them from unlicensed manufacturers, distributors and wholesalers must also obtain a license from MRS.

Because the law is slated to go into effect on August 1st, and it is not yet known whether the people’s veto effort will be successful in collecting sufficient signatures to postpone the law’s effective date, distributors, manufacturers, wholesalers and retailers of soft drinks in Maine need to take steps to be in full compliance with the law by the scheduled August 1 effective date.  Otherwise, assessments of back taxes, interest and penalties could ensue.

There are several exemptions to the new tax, including:  (1) sales to the federal government; (2) products exported from Maine; (3) coffee or tea bases; (4) certain juices and concentrates; (5) sales to other licensed wholesalers, distributors or manufacturers; (6) infant formula; (7) water with no flavoring that has not been artificially carbonated; (8) dietary aids; (9) powders and other base products designed to be mixed by the consumer; and (10) milk products.

Not surprisingly, there are numerous questions over what constitutes a soft drink, when the tax applies and who is responsible for paying it.  Some of the questions that have arisen so far are:

What constitutes a milk product? 

Do “milks” such as almond or soy milk qualify?

Will the tax be imposed on both the syrup used to make soft drinks and the soft drinks themselves?

What does it mean for a soft drink to be offered for sale?

How must affected business obtain the licenses the Act requires?

How must products be exported from Maineto qualify for the exemption?

If there is a people’s veto of the Act but it is not later voted down, will the Act be retroactively effective to August 1st?

Should affected businesses begin collecting the tax now, in anticipation of this possibility? 

Maine Revenue Services is developing some guidance on these issues, but has yet to issue any official publications that affected businesses can rely on.  Pierce Atwood LLP’s State & Local Tax Group attorneys, however, have had the chance to informally discuss with the agency some of the positions it may take in implementing the Act. For more information on this new tax, please email me at RCreamer@pierceatwood.com.

Launch of Maine Tax Law Blog

Welcome to the launch of this blog on Maine Tax Law.  This blog is being produced by Pierce Atwood's State and Local Tax (SALT) Group and is intended to provide a place for a timely discussion of current Maine tax issues.  Our SALT Group consists of several experienced attorneys dedicating their practice to Maine tax law.  If you would like to learn more about our SALT Group, please click on the link at the side of this page or send us an email.

Maine's New BETE Program.

If your company owns business equipment in Maine that was first subject to property tax in Maine on or after April 1, 2008 (this generally means placed in service after April 1, 2007), you should have already filed your business equipment tax exemption (BETE) application by May 1st with the local property tax assessor or gotten an extension.  http://mainegov-images.informe.org/revenue/forms/property/apps/beteapplication.pdf  This is important as failure to file the form on time can lead to loss of the exemption for the entire year.  However, if you have missed the deadline, all may not be lost.  The BETE law states that "Upon written request, the assessor may at any time grant further extensions of time to file the report."  If you've missed the May 1 deadline, you should immediately make a written request to your local assessor for an extension of time.

There has been much confusion about the retail exclusion from the BETE law.  The BETE provisions that exclude retail equipment are fairly complex.  Basically, property that is located at a "retail sales facility" and used "primarily" in a "retail sales activity" is not eligible for BETE unless certain exceptions apply.  "Retail sales facility," "retail sales activity" and "primarily" are all defined terms.  A retail sales facility is basically a place used to serve customers who are physically present at the facility for the purpose of selecting and purchasing goods or services at retail or for renting personal property.  The term does not include a separate structure warehouse or call center. A "retail sales activity" means an activity associated with the selection and purchase of goods or services or the rental of personal property, and does not include manufacturing.  "Primarily" means more than 50% of the time.  Maine Revenue has issued guidance indicating its interpretation of these terms.  The guidance contains some helpful examples that illustrate Maine Revenue's thinking.  http://mainegov-images.informe.org/revenue/propertytax/propertytaxbenefits/beteretailguidance.pdf

A few observations.  Retail can includes service businesses if the definitions are satisfied, not just traditional "stores."  Maine Revenue's guidance document basically distinguishes between facilities where customers select and purchase their services right away (generally excluded from BETE) versus facilities where the service is provided after the customer has left (the facility eligible for BETE) For example, equipment used primarily in a retail sales activity located at a barber shop, amusement park, bowling alley, restaurant, retail store or hotel is likely ineligible for BETE.  On the other hand, equipment used at an accounting firm, engineering firm or medical laboratory is likely eligible for BETE.  Special exclusions apply to certain large retailers.  Finally, keep in mind that equipment excluded from BETE in many cases will be eligible for the pre-existing business equipment tax reimbursement (BETR) program.  The BETR program has different filing deadlines and procedures than the BETE program.

Have I confused you yet?  There are obviously lots of details and gray areas that I can't cover in this short space.  If you have questions on BETE or BETR, send me an email. 

Jon Block