The supplemental budget signed by Governor LePage yesterday includes a use tax amnesty program, known as the 2012 Maine Use Tax Compliance Program. Maine use tax is a substitute for Maine sales tax for property that is used in Maine but for which no sales tax has been paid. Use tax applies to both businesses and individuals and is imposed at the same rate as sales tax. Many of the exemptions that apply to sales tax also apply to use tax. Examples of situations that give rise to Maine use tax are:
Taxpayer purchases a refrigerator at a store in New Hampshire (or other non-sales tax state) but uses it Maine.
Taxpayer purchases office supplies over the internet for use in Maine, and the internet retailer does not collect Maine sales tax.
Taxpayer purchases jewelry from a mail order catalogue, and the catalogue retailer does not collect Maine sales tax.
Taxpayer purchases artwork in another state for delivery to Maine. No tax is paid in the state of purchase because of an exemption or exclusion from tax for items delivered to another state.
Taxpayer purchases inventory tax-free for resale in Maine, but withdraws items from inventory for the taxpayer’s own use.
If a taxpayer fails to timely pay use tax, Maine Revenue may impose civil penalties and the Attorney General may criminally prosecute under certain circumstances. Under the newly created amnesty program, a taxpayer will be absolved from use tax liability, civil penalties, and criminal prosecution with respect to use tax incurred before January 1, 2012, if the taxpayer:
Comes forward between October 1, 2012, and November 30, 2012;
Fully and accurately reports the taxpayer’s proper use tax liability for the years 2006 through 2011; and
Pays the use tax liability for the three years between 2006 and 2011 in which the use tax liability is highest. The use tax liability for the three years between 2006 and 2011 in which use tax is lowest, as well as years before 2006, need not be paid.
The tax liability for the three highest years must be paid before November 30, 2012. However, the assessor is authorized to enter into an installment arrangement as long as the tax is fully paid by May 31, 2013.
If a taxpayer would prefer to come forward before October 1, the assessor may, but is not required to, compromise the use tax liability on the same terms as under the amnesty program.
Please contact any member of Pierce Atwood’s State and Local Tax Group if you have any questions about the use tax amnesty program or other state and local tax issues.
*UPDATE SINCE ALERT WAS ISSUED*
Maine Nexus? Opportunity for Retail Sellers
Out of state retailers who may have established nexus in Maine but have not yet registered to report and collect tax have a window of opportunity – from October 1 through November 30, 2012 -- to do so at low cost, under the 2012 Maine Use Tax Compliance Program described below.
Note that this program does not cover income taxes, so that if a retailer conducts activities that are not protected by PL 86-272 it may wish to consider seeking a voluntary disclosure arrangement (VDA) to cover income tax liabilities.
Please call Sarah Beard or Jon Block if you would like assistance or for more information.