Maine Sales Tax Changes, January 2016

Sales tax rates on several goods and services in Maine are scheduled to increase effective January 1, 2016.

Food

Maine law defines “grocery staples” as “food products ordinarily consumed for human nourishment” and exempts them from Maine sales tax. Effective January 1, 2016, the list of foods excluded from the definition of grocery staples will grow.

The following food products are currently excluded from sales tax:

• Candy and confections
• Dietary substitutes (except when prescribed by a physician)
• Dietary supplements and vitamins (except when prescribed by a physician)
• Medicines
• Prepared food
• Spiritous, malt or vinous liquors (beer, wine, hard alcohol)
• Sugary beverages such as iced tea, soda and soft drinks
• Tonics
• Water and ice

New definitions for candy and soft drinks take effect January 1, 2016:

• Candy will be defined as “a preparation of sugar, honey or other natural or artificial sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the form of bars, drops or pieces.”
• Soft drinks will be defined as “nonalcoholic beverages that contain natural or artificial sweeteners. ‘Soft drinks’ does not include beverages that contain milk or milk products; that contain soy, rice or similar milk substitutes; or that contain greater than 50% vegetable or fruit juice by volume.”

On the first day of the new year, the following foods will be subject to tax:

• Confectionery spreads, such as marshmallow fluff and crème, and chocolate spreads;
• Powdered and liquid drink mixes except powdered milk, infant formula, coffee and tea;
• Salads (not prepared by the retailer);
• Supplemental meal items such as corn chips, potato chips, crisped vegetable or fruit chips, potato sticks, pork rinds, pretzels, crackers, popped popcorn, cheese sticks, cheese puffs and dips;
• Fruit bars, granola bars, trail mix, breakfast bars, rice cakes, popcorn cakes, bread sticks and dried sugared fruit;
• Nuts and seeds that have been processed or treated by salting, spicing, smoking, roasting or other means (does not include peanut butter);
• Desserts and bakery items, including but not limited to doughnuts, cookies, muffins, dessert breads, pastries, croissants, cakes, pies, ice cream cones, ice cream, ice milk, frozen confections, frozen yogurt, sherbet, ready-to-eat pudding, gelatins and dessert sauces; and
• Meat sticks, meat jerky and meat bars.

Because bakery items, ice cream and salads are no longer exempt, whole cakes and pies will no longer be exempt. In addition, sales tax will apply to the following:

• Ice cream cakes
• Macaroni and potato salad and coleslaw
• Quarts of ice cream
• Sales of 6 or more doughnuts, muffins, cookies, pastries or bagels

Lodging sales tax

Maine sales tax on lodging in hotels, rooming houses and tourist or trailers camps will increase from 8% to 9%. Maine Revenue Services reminds that the rate increase applies “to transactions occurring on or after the effective date” and that sales occur “when there is a transfer of a service for payment.”

For example, when reservations for lodging are made prior to January 1, 2016, but the lodging service takes place on or after January 1, the 9% rate applies. This is true even if a deposit for the entire amount is received prior to January 1.

Service provider tax

The Maine service provider tax currently applies to sales of many cable and satellite television services and telecommunications services. Effective January 1, 2016, the list of services subject to the tax will expand to include sales of the following:

• Basic cable and satellite television service (currently only the “extended” services are subject to tax)
• Residential interstate and international telecommunications services (currently exempt for all customers, as of January 1 only services sold to businesses will qualify for the exemption)
• Satellite radio services, including the installation and use of associated equipment

In addition to being expanded, the service provider tax will also have a rate increase on January 1, 2016—from 5% to 6%. As explained by Maine Revenue Services, “Billing dates on or after January 1, 2016, for services subject to service provider tax will be subject to the increased rate of 6%.”

Please see General Information Bulletin No. 105 for additional information.

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photo credit: Peanut Butter Fluff ... Yum! via photopin (license)