Sales Tax By State: Maine
Maine Sales Tax Guide for Businesses 1 Maine Sales Tax Summary: Here’s a quick rundown of what you need to know about sales tax in Maine.
Quick, concise guide for businesses on how to charge, collect and pay sales taxes in Maine.
Understanding the basics
Maine has a statewide sales tax system which taxes retail sale of tangible personal property and selected services. The overall state sales tax rate is 5.5 percent, and unlike numerous states, Maine does not impose any local sales taxes on top of that. That simplicity makes it easier for businesses to apply one rate across the state, but there still are a host of rules, exemption and collection duties that demand careful attention.
What is and isn’t taxable
Maine sales tax is not due on just any sale. Taxable goods usually are most tangible products unless there is a specific exemption. Certain services can also be subject to tax, depending on the state's classification of them. Typical exemptions are for general and professional services, many types of medical supplies, and sales for resale with a proper resale certificate.
Food, medication and other typical exceptions
Food sold for home consumption is usually exempt from any tax, while food sold in a restaurant or processed into ready-to-eat meals is taxable. Prescription drugs are exempt, but over-the-counter medications can be taxed. It mostly comes down to usage and classification, as such companies would do better to check their individual exemption criteria for items they sell.
Sellers, nexus, and registration
If you have a business and sell products or provide services from a physical location within the state of Maine, then you must register for sales tax with the State of Maine prior to initiating taxable sales. Physical presence can consist of offices, stores, warehouses and employees who live and work in the state.
Remote Vendors with No Physical Presence
Remote sellers with no physical presence in the state are subject to a collection requirements if they have specified levels of sales of taxable tangible personal property or services delivered into Maine.
Economic nexus and remote sellers
Maine currently mandates that out-of-state sellers with a certain amount of sales into the state collect sales tax for sales which ship into the State. These economic thresholds are established to promote competitive equity between in-state sellers and remote sellers. If you make remote sales to Maine customers that exceed the threshold, y ou must register and collect Maine sales tax on all taxable merchandise and forward it according to the state’s schedule.
Collecting the correct amount
Collect and report sales tax based on the total taxable selling price, including both the sales price of the item as well as any charges that are relatively related to the sale (e.g., separately stated delivery fees or mandatory service charges). If any discounts, coupons, or rebates alter the taxable price of a good or service, the tax shall be calculated on the net amount that the purchase paid for such good or service.
Handling exemptions and resale certificates
If a customer alleges an exemption (for resale, for example, or for a particular exempt use), the seller needs to secure and retain as part of its records a valid and complete exemption certificate. A good resale certificate permits a seller to take a sale for resale exemption without having to collect sales tax, while other exemption certificates prove out nonprofit orders, manufacturing orders or some other kind of exempt order.
Filing, remittance, and recordkeeping
Registered sellers are required to file returns and pay collected tax to the state on a periodic basis. Frequency of filing is based on how much tax the company will collect and its taxable sales volume. Businesses should maintain proper sales records, exemption certificates, and documentation in order to support returns and prepare for potential audits. Keep records for the number of years you need to in your state, a few years is usually enough.
Point-of-sale and invoicing best practices
Show the sales tax separately on receipts and invoices, if possible. Transparent pricing allows customers to see how much tax is included and makes bookkeeping a snap. For online sales, display the sales tax during checkout and apply the tax to taxable goods and services based on Maine guidelines.
Use tax; transactions not subject to sales tax
Use tax may be due in situations where a buyer purchases goods out of state for use in Maine and no sales tax was collected at the time of purchase. Businesses making sales to Maine customers should understand and may be responsible for collecting and remitting use tax in some situations. Consumers owe a use tax when the seller did not collect tax.
Compliance tips for small businesses
Find out whether your business has nexus in Maine and how to ensure you are compliant with economic thresholds. 2. Sign up at once if you must charge tax. 3. Properly classify your products and services for taxability. 4. Collect and retain exemption certificates. 5. Configure precise point-of-sale tax calculations and show the tax on receipts. 6. Be sure to file on time, track tax deadlines and make payments when they are due.
Penalties, audits, and adjustments
Failing to collect and/or remit sales tax may also subject you to interest and penalties. The state is free to audit a retailer’s records to verify the correct amount of cooking wine was purchased. Should the audit reveal unpaid tax, the business may have to pay back taxes along with penalties and interest. There may be voluntary disclosure or self-correction programs that can minimize risk once problems are discovered early.
Practical examples
In-state retailer of clothing: Charge Maine sales tax on any taxable clothing unless the transaction qualifies for a special exemption.
- Out-of-state remote seller: Register to collect at the same 5.5 percent state rate for merchandise sold to customers in Maine.
- Restaurant selling prepared food: Collect sales tax on all prepared and ready-to-eat food items félicitation mariage.
Last-minute checklist before you begin collecting sales tax in Maine
Verify your nexus status and any applicable economic thresholds – Get registered with the state (if you’re collecting sales tax) if/when it is needed. – Determine any goods or services you sell that are considered taxable – Software/tool to help calculate, collect and exhibit sales tax accurately. – Collect & Maintain exemption certificates/data properly. * Pulling these every report can be a pain; implement a process to mitigate this burden! * Doing business in multiple states throws additional complexity when it comes to exemptions: some entities honor other second-state issued exemption docs which can complicate collection. Always remember -“just because there’s no place on an invoice doesn’t mean it isn’t treated as exempt must have sound documentation.”- File returns and make payments ON TIME for at least 2 years (so say so many of us who deal with compliance nightmares!) always keep records of everything!!
The basis of compliance is accuracy and records. Businesses that grasp the Maine sales tax rate, what is taxable in Maine and how nexus applies to them can keep away from costly errors and fines. This guide gives you a starting point; for more complicated transactions or unusual situations, consult your state’s guidance or a tax professional.