Maine Basic Business Taxes 2011
Maine's economic development, finance, and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include a corporate income tax, sales and use tax, and a railroad tax.
Area Development Research Desk (March 2011)
Corporate income tax:
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 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 7 percent. A 10 percent tax is imposed on automobiles rented on a short-term basis.
A 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 23 mills for 2007.
Tax Credits, Exemptions, and Reimbursements
Equipment Tax Reimbursement Program:
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.