Maine Basic Business Taxes
Corporate Taxes & Incentives Guide
A 3.5-8.93 percent corporate income tax rate, depending upon income, is levied on Maine taxable income. Financial institutions operating in Maine are subject to a separate franchise tax based on both income and assets.
In addition to the corporate income tax and the franchise tax (two tax options: Option 1 - a two-part tax consisting of 1 percent of Maine income and .008 percent of assets; Option 2 - tax on assets only and is imposed a .039 percent of Maine assets) levied on financial institutions, there is also an insurance premium tax (2 percent of premiums, 1 percent on qualified group disability policies, written in Maine) levied on insurance companies.
Sales and use taxes:
A 5.5 percent sales tax is imposed on the sale price of all tangible personal property and selected services and rental items. The sales tax rate imposed on certain living accommodations and the sale of prepared food is 8 percent. A 10 percent tax is imposed on automobiles rented on a short-term basis.
A 5.5 percent use tax is levied on the storage, use, or other consumption in the state of tangible personal property purchased at retail if sales tax was not paid at the time of purchase.
The purchase of custom computer programming is exempt from sales/use tax. If a standard program is purchased and then customized, the cost of the program would be taxable and the customizing, if stated separately, would be nontaxable.
The partial clean-fuel vehicle sales/use tax exemption is based on the portion of the sale or lease price of a clean-fuel vehicle sold by an original equipment manufacturer that exceeds the price of an identical gasoline-powered vehicle; if no comparison can be made, the exemption is figured on a percentage of the price.
Real and tangible personal property, unless exempt, is subject to taxation. Property is assessed according to just value, and rates vary with location.
The gross transportation receipts of railroad operations in Maine are taxed at a rate varying from 3.25-5.25 percent, depending on the proportion of gross receipts to net income.
Telecommunications property tax:
Telecommunications personal property owned or leased by a telecommunications business to provide interactive, two-way communications services for compensation is taxed at a rate of 22 mills for 2011.
Tax Credits, Exemptions, and Reimbursements
Business Equipment Tax Reimbursement Program (BETR):
This program reimburses certain taxpayers for local property taxes paid on qualified business machinery and equipment. The reimbursement is available for 12 years. However, legislation signed in to law on May 4, 2006, eliminates the personal property tax on eligible business equipment that is first subject to assessment on or after April 1, 2008.
Jobs and investment tax credit:
This credit is based on the federal credit amount, which is based on investment in qualified property. Limitations: taxpayer must create at least 100 new jobs within two years and invest at least $5 million in one year. The credit is limited to tax liability or $500,000, whichever is less. The credit cannot be carried back, but can be carried forward up to seven years.
Industrial inventories, including raw materials, goods in process, and completed work on hand, are exempt from property taxation.
Goods in transit:
Property in the possession of a common carrier while in interstate transportation is exempt from property taxes.
Research and development:
New machinery and equipment used by the purchaser directly and exclusively for research and development is exempt from sales and use taxes.
The research and development tax credit provides a state income tax credit of 5 percent of qualified research expenses that exceed average research expenses in Maine, as defined by the federal R&D tax credit, and a credit of 7.5 percent of basic research payments, defined by the federal credit.
The Super R&D credit applies to businesses whose qualified research expenses in the state exceed 150 percent of the average research expenses for the three taxable years prior to the effective date of the credit. The credit is equal to the amount of qualified expenses for the taxable year that exceed 150 percent of average expenses (subject to limitations).
The sale of any air or water pollution-control facility, or for any materials for the construction, repair, or maintenance of such a facility is exempt from sales and use tax. Certified water and air pollution-control facilities are exempt from property tax.
Industrial machinery and equipment:
Manufacturing machinery and equipment are exempt from sales and use taxes. Aircraft and boats sold to nonresidents, various railroad rolling stock, aircraft and watercraft placed in use in interstate commerce, and trucks and trailers manufactured in the state and purchased by a nonresident are also exempt from sales and use taxes.
Industrial fuels and raw materials:
Raw materials are exempt from sales and use tax. Industrial fuels are 95 percent exempt. The remaining 5 percent is subject to a tax of 5 percent.
Mines of gold, silver, or base metals, when opened and in the process of development, are exempt from property taxes for 10 years.
Seed capital tax credit:
The Seed Capital Tax Credit Program encourages investment in startup businesses by providing investors with an income credit of 40 percent of investment in qualified Maine businesses. Credits must be used over a four-year period and cannot exceed 50 percent of annual tax liability.
Dependent health benefits credit:
The credit applies to employers employing fewer than five employees and offering a qualified health benefit plan to all low-income employees and paying at least 80 percent of the costs for employees and at least 60 percent of the costs for children under 19 who are dependents of employees. The credit is equal to the lesser of 20 percent of the dependent health benefits paid or $125 per employee with dependent health-benefits coverage.
Employer-provided long-term care benefits credit:
The credit applies to employers that provide long-term care policy coverage as part of a benefits package. It is equal to the lesser of $5,000, 20 percent of the cost, or $100 per employee covered. For tax years beginning on or after January 1, 2000, employers are eligible for the credit if the policy on which premiums are paid meets the federal definition of a qualified long-term care insurance contract.
Employer-assisted daycare credit:
Employers providing daycare services for their employees through direct capital/personnel expenditures or subsidizing a licensed center can receive an income tax credit of up to $5,000. If the daycare services provided constitute quality childcare as certified by the Maine Department of Human Services, the maximum available credit increases to $10,000. Corporate taxpayers making certified investments in quality child-care services qualify for a credit up to 30 percent or $30,000.
High technology investment tax credit:
The credit is available to eligible businesses that are primarily engaged in high-tech activities and that purchase and use eligible equipment in primary high-tech activities.
Maine State Contact:
Maine Department of Economic and Community Development
59 State House Station
Augusta, ME 04333-0059
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.