SECTION I – INTRODUCTION

 

The Compendium of State Fiscal Information, updated on an annual basis, provides a summary of the most important fiscal information affecting Maine State Government.  It includes a summary of actual operating revenue and expenditures, descriptions of revenue sources, and summaries of Maine’s debt, General Fund reserve fund balances and Maine’s tax burden.  The Office of Fiscal and Program Review hopes you find this information useful.  Recent additions and changes to this report (see What’s New at the end of this introduction) as part of efforts to improve its usefulness may result in some questions for those users who may be using this information for historical purposes.  Questions regarding conversions of data or suggestions for improvements to this report should be directed to:  Office of Fiscal and Program Review, 5 State House Station, Augusta, Maine 04333-0005, Telephone:  (207) 287-1635.

 

Report Layout

 

This report presents information in 6 different sections.  The first section, the Introduction, presents an overview of the report and some of the accounting methods used for the data included in this report.  The second section, Summary of Major Taxes and Revenue Sources, provides brief summaries of the major taxes and revenue sources.  Each summary includes a discussion of the current tax rates, current fees and assessments or a description of the types of revenue included in the category.  Each major revenue source includes a table providing a 10-year history of the revenue generated.  Most of the summaries also include a history providing information on when the tax, fee, or assessment was first adopted and the major amendments affecting that tax, fee, or assessment.  The third section, Revenues and Expenditures, provides exhibits detailing revenues and expenditures of Maine State Government by major fund type.  The fourth section, Maine’s Bonded Debt, includes a summary of Maine’s general obligation debt, debt of the Maine Governmental Facilities Authority and other tax supported debt.  The fifth section provides a history of the major General Fund Reserve Funds, the Maine Budget Stabilization Fund (formerly the Maine Rainy Day Fund) and the Reserve for General Fund Operating Capital.  The sixth and final section, State and Local Tax Burdens, provides a history of Maine’s taxes per capita and as a percentage of personal income.

 

Accounting and State Fiscal Year

 

The information in this report is presented on a budgetary basis, which summarizes all funds as they are recorded on the official accounting system maintained by the Office of the State Controller within the Department of Administrative and Financial Services.  (Note:  some minor adjustments have been made by the Office of Fiscal and Program Review to correct for certain data entry errors.)  Revenue recognition and the amounts included in this report are based on a modified accrual basis of accounting.  Revenues are recognized when they become both measurable and available.  The major taxes subject to accrual are the individual income tax, sales and use tax and the telecommunications personal property tax.  At the end of fiscal year 1999, fuel taxes and, at the end of fiscal year 2000, several additional taxes became subject to accrual.  Revenues from other sources are recognized when received and expenditures are recorded when paid.  The following table summarizes the major taxes that are subject to accrual and the amounts accrued for the last 5 fiscal years.

 

Table I-1   Major Revenue Accruals

Fiscal Years 2003 - 2007

REVENUE SOURCE

2003

2004

2005

2006

2007

Income Taxes

 

 

 

 

 

    Individual Income Tax

$60,819,780

$45,868,113

$49,841,992

$51,758,860

$58,382,364

    Corporate Income Tax

$2,483,700

$1,169,580

$1,500,000

$1,800,000

$3,300,000

Sales and Use Taxes

$85,052,032

$88,819,327

$88,234,996

$92,348,183

$95,663,824

Service Provider Tax

 

 

 

 

 

    General Fund

$0

$0

$4,351,569

$3,895,006

$4,262,070

    Other Special Revenue Funds

$0

$0

$0

$0

$0

Estate Tax

$3,933,230

$5,520,171

$3,000,000

$5,871,996

$7,010,914

Tobacco Products Tax

$324,000

$317,169

$450,000

$500,000

$542,156

Cigarette Tax

$0

$0

$0

$0

$0

Telecommunications Personal Prop. Tax

$29,097,186

$27,903,428

$25,004,898

$20,627,030

$18,171,425

Real Estate Transfer Tax

$1,962,000

$2,319,480

$2,500,000

$3,000,000

$3,000,000

    General Fund

$981,000

$1,159,740

$1,250,000

$1,500,000

$1,500,000

    Other Special Revenue Funds

$981,000

$1,159,740

$1,250,000

$1,500,000

$1,500,000

Gasoline Tax

$13,479,460

$15,244,957

$16,201,336

$16,174,139

$16,529,053

Special Fuel

$5,400,000

$3,682,938

$4,516,027

$4,637,224

$5,853,002

 

 

Maine State Government’s fiscal year runs from July 1st to June 30th.  References to fiscal year throughout this report will use the year in which the fiscal year ends, i.e., fiscal year 2007 refers to the fiscal year ending June 30, 2007.

 

Fund Accounting

 

The normal operations of Maine State Government are recorded and controlled on a fund basis in three major operating funds:  General Fund, Highway Fund and Other Special Revenue Funds.  The tables in Section III provide a summary of total revenues and expenditures of these three major operating funds.  An additional table has been included in this year’s report, which provides a history of expenditures for all funds, see page 75.

 

General Fund

 

The General Fund is the primary operating fund of Maine State Government.  It receives revenue from general state revenue sources not otherwise accounted for in another fund.  The largest sources of revenue are from the Individual Income Tax, Sales and Use Tax, Cigarette Tax and Corporate Income Tax.  These four major taxes account for more than 90% of General Fund revenue.  The Graph and Tables on pages 80 to 83 provide a summary of revenues and expenditures of the General Fund.

 

Highway Fund

 

The Highway Fund is used to account for revenue derived from excise taxes and license and other fees relating to the registration, operation, and use of vehicles on public highways and from fuel used for the propulsion of these vehicles, with fuel taxes representing roughly two-thirds of Highway Fund revenue.  Pursuant to the Constitution of Maine, Article IX, Section 19, this revenue must be used for highway related activities.  This revenue is expended primarily within the Departments of Transportation, Public Safety and the Secretary of State (Bureau of Motor Vehicles).  The Graph and Tables on pages 85 to 88 summarize the revenues and expenditures of the Highway Fund.

 

Other Special Revenue Funds

 

Other Special Revenue Funds receive their revenues from segregated or dedicated sources.  The funds are expended by category for special purposes.  The state’s own source dedicated or special funds are segregated from the Federal Funds in this report and are referred to in this report as Other Special Revenue Funds.  The Fund for a Healthy Maine (whose primary income source is Tobacco Settlement funds) is also included within this grouping.  The graph and tables on pages 89 to 93 summarize the revenues and expenditures grouped under Other Special Revenue Funds.  The revenue and expenditures of the Fund for a Healthy Maine are also detailed in 2 separate tables on page 93.

 

Federal Funds

 

A major revenue source within the broader definition of Other Special Revenue Funds is derived from the federal government, including federal matching funds and block grants.  This report separates out these Federal Funds (Federal Expenditures Fund and Federal Block Grant Fund) from the state’s own source Other Special Revenue Funds.  For the purposes of this report, the Federal Expenditures Fund and the Federal Block Grant Fund will be referred to as “Federal Funds.”  The graphs and tables on pages 94 to 97 summarize the revenue and expenditures of the Federal Funds.

 

Other Funds

 

In addition to the operating funds that are listed above, there are numerous other funds that are used to record specific activities.  The Debt Service Fund is used to account for issuance of general obligation debt and the use of general obligation debt proceeds as well as the revenue collected for the payment of principal and interest on certain revenue bonds.  Capital Project Funds are used to account for financial resources used to acquire major capital assets other than those financed by proprietary funds.  Proprietary funds are used to account for on-going activities supported by fees for goods or services, with Enterprise Funds accounting for activities offering goods and services to the general public and Internal Services Funds accounting for the offering of goods and services between state agencies.  Fiduciary funds, including Expendable Trust Funds, Non-expendable Trust Funds and Agency Funds, are used to account for assets held by the state acting as a trustee or an agent for individuals, organizations or other funds.  The table on page 75 provides a history of expenditures in these “non-operating” funds.  Debt Service Funds and Internal Service Funds are included in this exhibit and are sub-totaled separately, but are excluded from the Total State Expenditures to avoid double-counting certain expenditures.

   

Sources

 

The information contained in this report was compiled from the following sources:

  • State Controller’s records and reports;
  • State Treasury reports;
  • The Maine Revised Statutes Annotated;
  • State Planning Office;
  • Various state departments and agencies; and
  • The U.S. Department of Commerce.

 

What’s New

 

Last year’s Compendium of State Fiscal Information added the following:

 

  • 10-year revenue histories in Section II with the descriptions of the major revenue sources;
  • A new table providing historical data on all state expenditures by fund, in addition to the Operating Fund exhibits; and
  • New tables segregating Other Special Revenue Funds in Section III into 2 groups, one for Federal Funds and one for state own-source funds.

 

This year’s report includes the following changes:

 

  • Section V that provides a history of the Maine Budget Stabilization Fund has been expanded to include the other major General Fund reserve fund, the Reserve for General Fund Operating Capital.
  • Section VI has been expanded to include a new graph depicting an inflation-adjusted history of Maine’s tax burden per capita.

 

 

SECTION II – SUMMARY OF MAJOR TAXES AND REVENUE SOURCES

 

This section contains summaries of the major tax and revenue sources.  The summaries identify the tax base for each tax or the persons or entities required to pay each of the major license fees or assessments as of June 30, 2007.  For those revenue sources that are not considered taxes, fees or assessments, a discussion or description of the major contributions are provided.  The summaries also include a revenue history by fund of these categories.  Most of these summaries also include a statutory history showing dates of adoption and the major amendments to the tax, fee or assessment.

 

 

INDIVIDUAL INCOME TAX – 36 M.R.S.A Part 8

 

A tax is imposed for each taxable year on the Maine taxable income of every resident individual, estate and trust of this state.  Maine taxable income is based on federal adjusted gross income with several Maine specific adjustments.  Nonresident individuals, estates and trusts are subject to tax on income derived from sources within this state.  Tax rates are progressive from 2% to 8.5%.  Table II-1 on page 7 provides a summary of 2007 individual income tax schedules, personal exemptions and standard deductions.  For nonresident individuals, the rate is determined based on taxable income from all sources and applied to Maine sourced income to determine the tax.  Tax rates for fiduciaries are the same as those for single individuals.

 

Withholding of Maine income tax from wages is required of every employer who maintains an office or transacts business in Maine and who makes payment of any wages subject to Maine income tax, whether or not the employee is a Maine resident.  Every person who maintains an office or who transacts business in Maine and who makes payment of any other items of income which constitute Maine taxable income is also required to withhold Maine income tax from such payments if federal withholding is required.

 

Every partnership and S corporation having a resident partner or shareholder or having Maine derived income is required to file an information tax return.  Limited liability companies are taxed as partnerships or corporations according to the treatment elected by the company for purposes of the federal income tax.

 

Individual Income Tax

Fiscal Year

General Fund

Other Special Revenue Funds

Total All Funds

1998

$907,981,057

$0

$907,981,057

1999

$1,004,937,795

$0

$1,004,937,795

2000

$1,074,622,161

$2,298,681

$1,076,920,843

2001

$1,167,749,567

$2,128,874

$1,169,878,441

2002

$1,069,834,791

$2,975,316

$1,072,810,107

2003

$1,071,701,694

$3,124,465

$1,074,826,159

2004

$1,156,715,909

$3,312,152

$1,160,028,060

2005

$1,296,255,557

$2,996,659

$1,299,252,216

2006

$1,364,368,543

$4,558,216

$1,368,926,759

2007

$1,464,928,346

$4,367,042

$1,469,295,388

 

Revenue Notes – Individual Income Tax – Individual income tax collections accrue to the General Fund.  At the end of each month 5.1% (increasing to 5.2% July 1, 2009) of this revenue is reserved for transfer to the Local Government Fund for municipal revenue sharing.   The amounts in Other Special Revenue Funds are revenue set aside for reimbursement to contractors/collection agencies under 36 M.R.S.A. §113.  Individual income tax revenue began year-end accruals of revenue in fiscal year 1996.  The amounts presented above are the gross amounts before the reductions for municipal revenue sharing and the transfers for tax relief programs described below.

 

History – Individual Income Tax

Adopted 1969.  Originally effective on July 1, 1969, for individuals, estates and trusts.  Amended numerous times since enactment to alter the tax rates and other provisions.  For individuals and fiduciaries, the tax rate brackets, standard deduction and personal exemption were made subject to indexing for inflation beginning in 1983 for each year except tax years 1988 and 1989.  For tax years 1992 through 1999 the tax rate brackets and personal exemption were not adjusted for inflation because the inflation factor was less than 1.000.  Beginning in 1989, the standard deduction is the same as the federal standard deduction except that for tax years beginning in 2003 and thereafter, federal increases to the standard deduction for married filers were not adopted.  Amended in 1998 to increase the personal exemption to $2,400 in 1998 and $2,750 in 1999 and indexed in subsequent years.  Amended in 1999 to increase the personal exemption to $2,850 in 2000 and subsequent years and repeal the indexing of the personal exemption.

 

 

INDIVIDUAL INCOME TAX – TAX RELIEF PROGRAM TRANSFERS – 36 M.R.S.A. §6203-A & §6656

 

Beginning in fiscal year 2005, amounts representing the cost of property tax relief payments to individuals under the Maine Residents Property Tax Program (also known as the circuit breaker program) are transferred from individual income tax revenue to the “Circuit Breaker reserve” to pay benefits certified under that program.  Prior to fiscal year 2005, benefits were paid from General Fund appropriations for that purpose.

 

Beginning in fiscal year 2006, amounts representing the cost of business personal property tax reimbursement payments under the Business Equipment Tax Reimbursement (BETR) program are transferred from individual income tax revenue to the “Business Equipment Tax Reimbursement reserve” to pay benefits under the BETR program.

 

Individual Income Tax – Tax Relief Program Transfers

Fiscal Year

General Fund

 General Fund

Total All Funds

Circuit Breaker Transfers

BETR Program Transfers

2005

($26,030,227)

$0

($26,030,227)

2006

($42,796,070)

($67,065,810)

($109,861,880)

2007

($44,440,759)

($66,553,092)

($110,993,852)

 

Revenue Notes – Individual Income Tax – Tax Relief Program Transfers

For budgetary accounting purposes, the transfers to the tax relief programs are deducted from Individual Income Tax revenue prior to the calculation of the transfer to revenue sharing so that these transfers reduce the transfers for municipal revenue sharing by 5.1% of the amount of the gross transfers.

 

History – Individual Income Tax – Tax Relief Program Transfers

The Circuit Breaker transfer mechanism was enacted by PL 2003, chapter 673, Part BB, effective for fiscal year 2005.  The BETR program transfer mechanism was enacted by PL 2005, chapter 12, Part BBB, effective for fiscal year 2006. 

 

Table II-1  State of Maine – Individual Income Tax – 2007 Rates

2007 Cost-of-living adjustment is 1.1365

Note:  The 2007 tax rate schedule dollar bracket amounts are adjusted by multiplying

 the cost-of-living adjustment, 1.1365, by the dollar amounts of the tax rate tables

 specified in 36 M.R.S.A. §5111 subsections 1-B, 2-B and 3-B (see 36 M.R.S.A. §5403).  The personal exemption amount is not subject to the inflation adjustment for tax year 2007.

 

 

Tax Rate Schedule #1

FOR SINGLE INDIVIDUALS AND MARRIED PERSONS FILING SEPARATE RETURNS

If the taxable income is:

Less than $4,750

$4,750 but less than $9,450

$9,450 but less than $18,950

$18,950 or more

The tax is:

2.0% of the taxable income

$95 plus 4.5% of excess over $4,750

$307 plus 7.0% of excess over $9,450

$972 plus 8.5% of excess over $18,950

 

Tax Rate Schedule #2

FOR UNMARRIED OR LEGALLY SEPARATED INDIVIDUALS WHO QUALIFY AS HEADS-OF-HOUSEHOLDS

If the taxable income is:

Less than $7,150

$7,150 but less than $14,200

$14,200 but less than $28,450

$28,450 or more

The tax is:

2.0 of the taxable income

$143 plus 4.5% of excess over $7,150

$460 plus 7.0% of excess over $14,200

$1,458 plus 8.5% of excess over $28,450

 

Tax Rate Schedule #3

FOR MARRIED INDIVIDUALS AND SURVIVING SPOUSES FILING JOINT RETURNS

If the taxable income is:

Less than $9,500

$9,500 but less than $18,950

$18,950 but less than $37,950

$37,950 or more

The tax is:

2.0% of the taxable income

$190 plus 4.5% of excess over $9,500

$615 plus 7.0% of excess over $18,950

$1,945 plus 8.5% of excess over $37,950

 

PERSONAL EXEMPTION:  $2,850

 

STANDARD DEDUCTION:

        Single - $5,350

        Head-of-Household - $7,850

 

 

Married Filing Jointly - $8,900

Married Filing Separate - $4,450

 

Additional Amount for Age or Blindness:

$1,050 if married (whether filing jointly or separately) or a qualified surviving spouse.  The additional amount is $2,100 if one spouse is 65 or over and blind, $2,100* if both spouses are 65 or over, $4,200* if both spouses are 65 or over and blind, etc.

 

*If married filing separately, these amounts apply only if you can claim an exemption for your spouse.

 

$1,300 if unmarried (single or head-of-household).  The additional amount is $2,600 if the individual is both 65 or over and blind.

 

Note:  If taxpayer can be claimed as a dependent on another person’s return, the standard deduction is the greater of $850 or earned income plus $300 (up to the standard deduction amount).

 

 

CORPORATE INCOME TAX – 36 M.R.S.A. Part 8

 

A corporate income tax is imposed on all corporations subject to federal income tax and having nexus with Maine with the exception of financial institutions subject to the franchise tax and insurance companies subject to the insurance premium tax.  The tax is levied on Maine net income which is federal taxable income as modified by Maine law.  In the case of a corporation doing business both within and outside of the state before 2007, Maine net income was determined by apportioning the modified federal taxable income according to a formula using payroll, property and sales (double-weighted).  Beginning in 2007, modified federal taxable income is apportioned based on the percentage of the taxpayer’s sales in Maine.  The income of mutual fund service providers is also apportioned based only on sales.  Tax rates are progressive from 3.5% to 8.93% (see table below).  A taxable corporation that is a member of an affiliated group operating in a unitary fashion must file a combined report.

 

Corporate Tax Rates

If the taxable income is:

The tax rate is:

 $           0 but not over  $ 25,000

3.50%

 $  25,000 but not over   $ 75,000 

7.93%

 $  75,000 but not over  $250,000

8.33%

 $250,000 or over

8.93%

 

Limited liability companies are taxed as partnerships or corporations according to the treatment elected by the company for purposes of the federal income tax.

 

Corporate Income Tax

Fiscal Year

General Fund

Other Special Revenue Funds

Total All Funds

1998

$107,375,484

$0

$107,375,484

1999

$144,942,751

$0

$144,942,751

2000

$150,045,645

$0

$150,045,645

2001

$96,102,796

$180,000

$96,282,796

2002

$77,366,103

$0

$77,366,103

2003

$91,188,393

$0

$91,188,393

2004

$111,616,051

$0

$111,616,051

2005

$135,862,913

$0

$135,862,913

2006

$188,015,558

$0

$188,015,558

2007

$183,851,533

$0

$183,851,533

 

Revenue Notes – Corporate Income Tax

Corporate income tax collections accrue to the General Fund.  At the end of each month, 5.1% (increasing to 5.2% July 1, 2009) of this revenue is reserved for transfer to the Local Government Fund for municipal revenue sharing.  In fiscal year 2001, the Other Special Revenue amounts reflects the revenue set aside for reimbursement to contractors/collection agencies under 36 M.R.S.A. §113.  Corporate income tax revenue began year-end accruals of revenue in fiscal year 2000.

 

History – Corporate Income Tax

Adopted 1969.  Originally effective January 1, 1969.  Amended numerous times since enactment to alter the tax rates and other provisions.  Amended by PL 2007, c. 240, Part V to change the apportionment formula.

 

 

FRANCHISE TAX ON FINANCIAL INSTITUTIONS – 36 M.R.S.A. c. 819

 

The franchise tax on financial institutions is imposed annually on every financial institution doing business in Maine that had a substantial physical presence in the state and which at any time during the taxable year realized Maine net income or had Maine assets.  Beginning in 2006, financial institutions may choose to pay the franchise tax comprised of two parts:  (1) one percent of Maine net income and (2) 8¢ per $1,000 of Maine assets or to pay franchise tax at the rate of 39¢ per $1,000 of Maine assets with no assessment based on Maine net income.  A financial institution that is a member of an affiliated group operating in a unitary fashion must file a combined report.

 

Revenue Notes – Franchise Tax on Financial Institutions

The franchise tax on financial institutions is collected as part of the corporate income tax filing process and accrues to the General Fund with 5.1% (increasing to 5.2% July 1, 2009) transferred to the Local Government Fund for municipal revenue sharing.  Revenue from this tax is included under Corporate Income Tax.  Separate detail is not available.

 

History – Franchise Tax on Financial Institutions

Adopted 1983.  Originally enacted with the corporate income tax (P&SL 1969 c. 154).  Financial institutions were taxed at the same rate as corporations until 1984 when the tax was changed to ½ of 1% of Maine net income and 4¢ per $1,000 of Maine assets.  Tax was doubled in 1986.  Amended in 1997 and 1998 to clarify definitions, application and apportionment.  Amended in 2006 to provide option of tax based solely on Maine assets.

 

 

SALES AND USE TAXES – 36 M.R.S.A. chapters 211-225

 

Sales Tax – The sales tax is imposed at the rate of 5% of the sale price on retail sales of tangible personal property and the taxable services of transmission and distribution of electricity, prepaid calling arrangements and long-term automobile rentals or leases; at 7% on temporary rentals of living quarters in hotels, rooming houses, tourist and trailer camps, the sale of liquor by the drink and prepared food; and at 10% on the short-term rental of automobiles.  The tax is also imposed on casual sales of motor vehicles, camper trailers, truck campers, livestock trailers, special mobile equipment, boats and aircraft.  Sales of new manufactured housing (mobile homes and modular homes) are subject to the 5% tax, usually at 50% of the selling price.  Beginning July 1, 2004, other services formerly taxed under the sales tax are taxed under the service provider tax described below.

 

Use Tax – The use tax is imposed at the same rate as the sales tax on the sale price of tangible personal property and taxable services purchased at retail sale beyond the collection jurisdiction of the state for use, storage or other consumption in Maine, unless substantial (12 months) use was made of the property elsewhere before it was brought to Maine.  An exception is made for motor vehicles registered as automobiles that were purchased and actually used in another state before being brought to Maine, if the purchaser was a resident of the other state at the time of purchase.  The use tax does not apply to purchases on which Maine sales tax has been paid, and credit is allowed for sales or use tax paid in another jurisdiction up to the amount of the Maine tax.

 

Sales and Use Taxes

Fiscal Year

General Fund

Other Special Revenue Funds

Total All Funds

1998

$833,755,683

($12)

$833,755,672

1999

$814,321,914

($7)

$814,321,907

2000

$847,355,504

$2,483

$847,357,987

2001

$817,781,460

$279,134

$818,060,594

2002

$836,134,084

($1)

$836,134,082

2003

$857,486,801

$8,355

$857,495,156

2004

$917,243,245

$5,193

$917,248,437

2005

$896,576,322

$23,091

$896,599,413

2006

$946,174,276

$8,510

$946,182,786

2007

$971,455,721

$97

$971,455,818

 

Revenue Notes – Sales and Use Taxes

Sales and Use Tax collections accrue primarily to the General Fund.  At the end of each month, 5.1% (increasing to 5.2% July 1, 2009) of this revenue is reserved and transferred to the Local Government Fund for municipal revenue sharing.   The Other Special Revenue Funds amounts represent transfers to the Passamaquoddy Sales Tax Fund and transfers for collections agency costs pursuant to 36 M.S.R.A. §113.  Some small amounts represent adjustments for sales taxes collected by state agencies.  Sales and Use Tax revenue began year-end accruals of revenue in fiscal year 1998.

 

History – Sales and Use Taxes

Originally enacted effective July 1, 1951 at 2%.  The following rate changes have been implemented.

 

Sales Tax Rate History

 

Effective date

of change

 

General

Rate

Meals

(incl.

Liquor by drink)***

 

Short term

lodging

 

Short term

autos

7/1/51

2%

*

 

 

7/1/57

3%

*

 

 

9/1/59

“

*

added*

 

7/1/63

4%

*

*

 

11/1/67

4.5%

*

*

 

6/1/69

5%

*

*

 

10/24/77

“

*

*

added*

7/16/86

“

**

7%

7%

8/1/91

6%

7%

“

“

8/1/94

“

“

“

10%

10/1/98

5.5%

“

“

“

7/1/00

5%

“

“

“

*          Included in general rate

**       Liquor served by drink taxed at 10% from 12/1/89 to 8/1/91

***     Definition of taxable “meals” has been amended from time to time.

 

History – Sales and Use Taxes (continued)

Amended to include taxation of the following services:

Effective date

of change

Services added

9/1/59*

Short-term rentals of living quarters

7/1/65*

Telephone and telegraph service (now telecommunications service)

10/24/77

Rental or lease of automobiles

12/15/84*

Extended cable TV services

7/16/86*

Fabrication services and custom computer programming

8/1/89*

Rental of video material and equipment

9/18/99

Prepaid calling arrangements

10/1/99*

Rental of audio materials and equipment

10/1/99*

Rental of furniture

*          Effective 7/1/04 all services except rental of living quarters, transmission and distribution of electricity, auto lease or rental and prepaid calling services were moved from the sales and use tax to the service provider tax

 

Amended many times since enactment to add or repeal exemptions.  The 6% tax rate was reduced to 5 ½% on October 1, 1998 pursuant to the operation of 36 M.R.S.A. §1811.  PL 1999, c. 698 repealed tax on snack food effective August 11, 2000.  PL 2001, c. 439, Part TTTT set the rate on all prepared food at 7% beginning October 1, 2001.  PL 2001, c. 439, Part UUUU established the Tourism Marketing Promotion Fund within the Department of Economic and Community Development, Office of Tourism, which requires, effective July 1, 2003, that 5% of the 7% sales tax revenue collected in the prior fiscal year on sales of meals and lodging, after the reduction for transfers to the Local Government Fund, be transferred to the Tourism Marketing Promotion Fund.  PL 2003, c. 673, Part V transferred taxation of most services to the Service Provider Tax beginning July 1, 2004.

 

 

SERVICE PROVIDER TAX – 36 M.R.S.A. – c.358

 

The service provider tax is imposed at the rate of 5% on the value of the following services sold in this state:  1) extended cable television services; 2) fabrication services; 3) rental of video media and video equipment; 4) rental of furniture, audio media and audio equipment pursuant to a rental-purchase agreement as defined in Title 9-A, section 11-105; 5) telecommunication services; 6) installation, maintenance or repair of telecommunications equipment; 7) private nonmedical institution services (PNMI’s); 8) community support services; 9) day habilitation services; 10) personal support services; and 11) residential training services.

 

Service Provider Tax

Fiscal Year

General Fund

Other Special Revenue Funds

Total All Funds

2005

$44,645,517

$15,535,099

$60,180,616

2006

$47,028,430

$30,960,179

$77,988,609

2007

$49,400,532

$33,955,412

$83,355,944

 

Revenue Notes – Service Provider Tax

Service provider tax revenues from above-listed services 1 to 6 accrue to the General Fund.  At the end of each month, 5.1% (increasing to 5.2% July 1, 2009) of this revenue is reserved and transferred to the Local Government Fund for municipal revenue sharing.  (See page 12 for more detail on these transfers.)  Service provider tax revenues from above-listed items 7 to 11 accrue to Other Special Revenue Funds accounts in the Department of Health and Human Services and are used to fund MaineCare services, with a part of the proceeds of the tax used to replace General Fund appropriations for these purposes.  The General Fund portion of the Service Provider Tax has been subject to year-end accrual since its implementation.

History – Service Provider Tax

Enacted in PL 2003, c. 673, Part V effective July 1, 2004.  Above-listed services 1 to 6 were formerly taxed under the sales and use tax.  Amended in 2005 to include community support services (PL 2005, c. 12, Part VV) and day habilitation services, personal support services and residential training services (PL 2005, c. 386, Part S).

 

 

TRANSFERS FOR MUNICIPAL REVENUE SHARING – 30-A M.R.S.A. §5681

 

Transfers are made on the last day of each month from the General Fund to the Local Government Fund to set aside revenue to be distributed to municipalities to lessen the burdens on local property taxes.  Amounts equal to 5.1%, increasing to 5.2% on July 1, 2009, of the taxes collected and credited to the General Fund under Title 36; Parts 3 and 8, the individual income tax, the corporate income tax, the franchise tax on financial institutions, a portion of the service provider tax and the sales and use taxes are transferred.  The amounts in the Local Government Fund are distributed to municipalities on the 20th day of each month based on a formula factoring in property tax burden and population.  An annual growth ceiling is established for the Local Government Fund equal to $100,000,000 for fiscal year 2005-06, adjusted for inflation.  Amounts exceeding the annual growth ceiling are transferred to the Disproportionate Tax Burden Fund, which is also referred to as “Revenue Sharing II,” and distributed to municipalities with property tax mill rates over 10 mills based on a formula factoring in population and the portion of the property tax mill rate that exceeds 10 mills.

 

State-Municipal Revenue Sharing

Fiscal Year

General Fund

Other Special Revenue Funds

Total All Funds

1998

($94,304,723)

$89,495,308

($4,809,415)

1999

($98,997,466)

$111,924,140

$12,926,674

2000

($105,673,142)

$105,697,654

$24,513

2001

($106,163,291)

$105,733,382

($429,909)

2002

($101,150,084)

$101,150,084

$0

2003

($103,039,221)

$103,039,221

$0

2004

($111,464,335)

$111,469,714

$5,378

2005

($119,712,814)

$119,712,814

$0

2006

($124,222,180)

$124,222,180

$0

2007

($130,490,756)

$130,069,834

($420,922)

 

Revenue Notes – Transfers for Municipal Revenue Sharing

The General Fund column shows the amounts reserved and netted out of General Fund revenue from individual income tax, corporate income tax, franchise tax on financial institutions, sales and use taxes and a portion of the service provider tax.  The Other Special Revenue Funds column shows the amounts transferred to the Local Government Fund.  Prior to fiscal year 1999, the amounts in these tables were not equal due to the one-month lag between the reserving of the revenue in the General Fund and the recognition of the revenue in the Local Government Fund. Effective in fiscal year 1999, the State Controller began recording transfers to the Local Government Fund during the same month in which the amounts were reserved in the General Fund.  In fiscal year 1999, this represented a one-time increase of revenue to the Local Government Fund of $15,746,438; the change did not affect the timing or the amount of payments to municipalities.  Prior to fiscal year 1999, the difference in any fiscal year is equal to the amount of revenue reserved in June from the “revenue sharing” taxes of that fiscal year compared to the amounts reserved from those same taxes in June of the prior fiscal year.  After fiscal year 1999, the difference represents adjustments to prior period revenue that affect these transfers.

 

History – Transfers for Municipal Revenue Sharing

First implemented by PL 1971, c. 478.  For fiscal years 1972 and 1973, the distributions were provided by appropriations of $2,900,000 and $3,700,000, respectively.  Beginning July 1, 1973, 4% of the collections of the individual income tax, corporate income tax, franchise tax on financial institutions and sales and use taxes were set aside for distribution to municipalities.  PL 1981, c. 522, effective July 1, 1983, required in addition to the 4% that $237,000 of sales and use tax receipts be transferred monthly to the Local Government Fund for municipal revenue sharing.  Amended by PL 1983, c. 855 to increase the percentage from 4% to 4.75%, effective June 30, 1984, and to increase the percentage again from 4.75% to 5.1%, effective July 1, 1985.  PL 1991, c. 780, part Q, effective August 1, 1992, eliminated the provision requiring the transfer of the $237,000 per month or $2,844,000 annually from sales and use tax receipts.  The transfers to the Local Government Fund were suspended for 6 months in fiscal year 1992 to achieve approximately $32.5 million in additional General Fund revenue.  This suspension was partially offset by a General Fund appropriation of $14,400,000 in the same fiscal year.  PL 2001, c. 559, Part G postponed to May 1, 2003 the increase to 5.2% originally schedule for January 1, 2003 by PL 2001, c. 439, Part OO.  PL 2001, c. 714, Part Y further postponed the increase to 5.2% until July 1, 2003.  PL 2003, c. 20, Part W further postponed the increase to 5.2% until July 1, 2005.  PL 2005, c. 12, Part E postponed the increase to 5.2% until July 1, 2007.  PL 2005, c. 2, Part H rebased the annual growth ceiling on the Local Government Fund.  PL 2007, c. 240, Part S postponed the increase to 5.2% until July 1, 2009.

 

 

ESTATE TAX – 36 M.R.S.A. c.575

 

The Maine estate tax is imposed upon the transfer of the estate of every person who was a Maine resident at the time of death.  For deaths occurring before January 1, 2002, the tax is equal to the amount by which the credit allowed against the federal estate tax for state death taxes exceeds the amount of such taxes actually paid to other states, provided that the allowance for such taxes may not exceed that percentage of the federal tax credit which the other states’ portion of the estate is to the total estate.  Beginning in 2002, the federal estate tax and the federal credit for state death taxes were phased out.  The federal credit was reduced to 75% in 2002, 50% in 2003, 25% in 2004 and completely eliminated beginning in 2005.  For deaths occurring after 2002, the Maine estate tax is equal to the tax that would be owed using the formula for calculating the federal credit for state death taxes in effective on December 31, 2002 (exclusive of any reduction in the maximum credit amount) and based on the unified credit amount as of December 31 2000, $1,000,000 for deaths in or after 2006.  A similar tax is imposed on real and tangible personal property having Maine situs passing by reason of the death of a person not a Maine resident, at the same percentage of the federal allowance for state death taxes that the value of the property taxable in Maine bears to the total estate.

 

Estate Tax

Fiscal Year

General Fund

Other Special Revenue Funds

Total All Funds

1998

$34,335,598

$6,200,000

$40,535,598

1999

$29,768,114

$0

$29,768,114

2000

$58,803,666

$0

$58,803,666

2001

$30,616,759

$0

$30,616,759

2002

$23,420,240

$0

$23,420,240

2003

$30,520,320

$0

$30,520,320

2004

$32,075,501

$0

$32,075,501

2005

$32,255,727

$0

$32,255,727

2006

$75,330,514

$0

$75,330,514

2007

$54,820,038

$0

$54,820,038

Revenue Notes – Estate Tax

Estate Tax collections accrue to the General Fund with the exception of a one-time transfer of $6,200,000 in fiscal year 1998 to a dedicated account, the Children’s Health Reserve Account, that was established by PL 1997, c. 560, Part C.  The Estate Tax began year-end accruals at the end of fiscal year 2000.

 

History – Estate Tax

Adopted 1927.  The current Maine estate tax was enacted in 1981 to replace previous estate tax based on federal credit for state death taxes beginning with deaths occurring after June 30, 1986.  An additional inheritance tax was phased out between 1981 and 1986.  Amended in PL 2001, c. 559, Part GG to calculate Maine estate tax under the formula in effect before federal reductions.  Amended in PL 2003, c. 20, Part JJ to extend that treatment through 2004.  Amended in PL 2003, c. 673, Part D to extend nonconformity with federal changes.

 

 

CIGARETTE TAX – 36 M.R.S.A. c.703 & 22 M.R.S.A. §1546

 

The cigarette tax is imposed on all cigarettes held in this state for retail sale.  The rate of the tax is 100 mills per cigarette or $2.00 per pack.

 

Cigarette Tax

Fiscal Year

General Fund

Other Special Revenue Funds

Total All Funds

1998

$42,875,264

$28,845,919

$71,721,183

1999

$74,858,953

$3,500,000

$78,358,953

2000

$74,933,325

$0

$74,933,325

2001

$74,357,622

$0

$74,357,622

2002

$94,081,937

$0

$94,081,937

2003

$94,397,943

$0

$94,397,943

2004

$92,625,638

$0

$92,625,638

2005

$91,906,017

$0

$91,906,017

2006

$151,497,467

$0

$151,497,467

2007

$152,957,212

$0

$152,957,212

 

Revenue Notes – Cigarette Tax

Revenue from the Cigarette Tax accrues primarily to the General Fund.  This tax began year-end accrual of revenue in fiscal year 2000. PL 1997, c. 560, Part A doubled the tax to 37 mills per cigarette or 74¢ per package of 20 and dedicated the revenue to the Tobacco Tax Relief Fund (22 M.R.S.A. §1546) effective November 1, 1997.  It also required revenue transfers out of the Other Special Revenue Tobacco Tax Relief Fund to support allocations made to the Tobacco Prevention and Control program within the Department of Health and Human Services and transfers to the General Fund in amounts equal to the budgeted amount of Cigarette Tax revenue in fiscal years 1998 and 1999.

 

History – Cigarette Tax

Adopted 1941.  PL 1941, c. 298, sec. 20 stated that the revenue generated by the tax was appropriated for the payment of old age assistance, less any expenses incurred in assessing the tax.  PL 1945, c. 297 provided that the revenue generated from the tax be credited to the General Fund.  The table below summarizes the cigarette tax rate changes.

 

 

Cigarette Tax Rate History Table

Effective date of change

Rate in mills per cigarette

Rate per pack of 20 cigarettes

6/1/41

1

$.02

7/1/47

2

$.04

7/1/55

2.5

$.05

7/1/61

3

$.06

7/1/65

4

$.08

7/1/67

4.5

$.09

6/1/69

6

$.12

7/1/71

7

$.14

7/1/74

8

$.16

9/23/83

10

$.20

10/1/89

15.5

$.31

1/1/91

16.5

$.33

7/1/91

18.5

$.37

11/1/97

37

$.74

10/1/01

50

$1.00

9/19/05

100

$2.00

 

 

TOBACCO PRODUCTS TAX – 36 M.R.S.A. c.704

 

A tax is imposed on all tobacco products, other than cigarettes, produced or imported for sale in Maine.  The tax does not apply to tobacco products exported from the state.  The tax rate for smokeless tobacco, including chewing tobacco and snuff, is 78% of the wholesale sales price.  The tax rate for other tobacco, including cigars, pipe tobacco and other tobacco intended for smoking, is 20% of the wholesale sales price.

 

Tobacco Products Tax

Fiscal Year

General Fund

Total All Funds

1998

$2,649,058

$2,649,058

1999

$2,891,201

$2,891,201

2000

$3,409,846

$3,409,846

2001

$3,144,209

$3,144,209

2002

$3,517,662

$3,517,662

2003

$4,016,527

$4,016,527

2004

$3,979,008

$3,979,008

2005

$4,444,687

$4,444,687

2006

$5,453,903

$5,453,903

2007

$5,996,254

$5,996,254

 

Revenue Notes – Tobacco Products Tax

Revenue from the Tobacco Products Tax accrues to the General Fund.  Year-end accrual of revenue for this tax began at the end of fiscal year 2000.

 

History – Tobacco Products Tax

A similar tax at the rate of 20% of the retail sale price was in effect from July 1, 1947 to December 31, 1955.  The tax on smokeless tobacco was first imposed July 16, 1986 at a rate of 45% of the wholesale sales price.  The rate was increased to 50% on October 1, 1989, 55% on January 1, 1991 and to 62% on July 1, 1991.  The rate increased to 78% on October 1, 2005.  The tax on other tobacco products was first imposed July 16, 1986 at a rate of 12% of the wholesale sales price.  The rate was increased to 13% on October 1, 1989, to 14% on January 1, 1991 and to 16% on July 1, 1991.  The rate increased to 20% on October 1, 2005.

 

 

CIGARETTE & TOBACCO PRODUCTS LICENSE FEES – 36 M.R.S.A. cc. 703-704 & 22 M.R.S.A. c.262-A

 

The Department of Health and Human Services collects license fee revenue associated with the wholesale and retail sale of cigarettes and tobacco products.  Each distributor doing business in Maine must secure a distributor’s license from the Bureau of Revenue Services.  There is no fee for the Bureau of Revenue Services license.  The Department of Health and Human Services, Bureau of Health licenses the retail sale of cigarettes and tobacco products.  The DHHS fee for an annual retail tobacco license is set by the department through rule-making, see table below for current fees.

 

Retail Tobacco License Fees

License Type

Fee

Retail Tobacco I – Less than 30% annual gross revenue from total cigarette/tobacco sales

Retail Tobacco II – Between 30% and 50% of annual gross revenue from total cigarette/tobacco sales

Retail Tobacco III – Greater than 50% of annual gross revenue from total cigarette/tobacco sales

Seasonal Mobile Tobacco Vendor License

 

 

Tobacco Vending Machine

$100

 

$125

 

$150

 

$50 for the first fair location; $10 for each additional fair location

$50 per machine

 

Cigarette & Tobacco Product License Fees

Fiscal Year

General Fund

Other Special Revenue Funds

Total All Funds

1998

$1,825

$17,720

$19,545

1999

$12,125

$18,700

$30,825

2000

$2,443

$44,458

$46,901

2001

$9,250

$21,664

$30,914

2002

$5,710

$7,485

$13,195

2003

($982)

$6,155

$5,173

2004

$0

$8,462

$8,462

2005

$78,521

$1,725

$80,246

2006

$261,200

$2,800

$264,000

2007

$244,640

$11,337

$255,978

 

Revenue Notes – Cigarette & Tobacco Products License Fees

Revenue collected by the Bureau of Revenue Services through 2002 for the wholesale distribution of cigarettes and tobacco products accrued to the General Fund.  Fees for retail licenses collected by the Department of Health and Human Services, Bureau of Health accrue as dedicated revenue to the Bureau of Health through fiscal year 2004.  Beginning in fiscal year 2005, the retail license revenue accrues to the General Fund.

 

History – Cigarette & Tobacco Products License Fees

Adopted 1941.  Amended by PL 1985, c. 783 effective June 1, 1986 to add tobacco products distributors license.  PL 1995, c. 470 effective September 29, 1995 established the retail license for cigarette and tobacco products with the Department of Health and Human Services, Bureau of Health and set the fee at up to $25.  PL 2001, c. 526 repealed the Bureau of Revenue Services distributor license fees effective July 2, 2002.  PL 2003, c. 673, Part CC changed the retail license from a one-time requirement to an annual requirement and increased the maximum fee from $25 to $50.  PL 2005, c. 12, Part TT repealed the $50 maximum fee for a retail tobacco license and required the Department of Health and Human Services to establish a sliding-scale license fee based on the relative size of retail tobacco licensees that generates the same total revenue that a $100 flat fee would generate.  Fees are established by rule.

 

 

LIQUOR SALES AND OPERATIONS – 28-A M.R.S.A. §88

 

Up until fiscal year 2004, the selling price of all spirits and fortified wine had been used to produce a state liquor tax which was deposited in the General Fund.  The State Liquor Tax was formerly referred to as an Excise Tax on Spirits and was used to recover all liquor-related sales and operations costs of the Bureau of Alcoholic Beverages and Lottery Operations.  As described below in more detail, this tax has been supplanted by the provisions of 28-A M.R.S.A. §88 which authorized a ten-year year lease with a private entity for the sales and distribution of spirits; this function and revenue source was formerly described and tabulated in the Liquor Taxes section of this report.

 

In July 2004, the state signed a ten-year lease with a private entity for the sale and distribution of spirits subject to price regulation by the Bureau of Alcoholic Beverages and Lottery Operations.  Throughout the term, the private entity is guaranteed a gross profit baseline percentage of 36.8% of aggregate sales.  Revenue sharing with the state is determined on a calendar year basis when profits exceed 36.8% at which time an amount equal to 50% of the gross profit overage is transferred to the General Fund.

 

Liquor Sales and Operations Revenue

Fiscal Year

General Fund

Total All Funds

1998

$20,546,162

$20,546,162

1999

$19,794,778

$19,794,778

2000

$23,226,758

$23,226,758

2001

$24,231,271

$24,231,271

2002

$25,168,524

$25,168,524

2003

$26,073,276

$26,073,276

2004

$102,182,743

$102,182,743

2005

$49,845,027

$49,845,027

2006

$2,560,044

$2,560,044

2007

$4,440,935

$4,440,935

 

Revenue Notes – Liquor Sales and Operation

Through fiscal year 2004, the General Fund revenue in this category represents the net profits from liquor sales and operations of the Bureau of Alcoholic Beverages and Lottery Operations (BABLO) transferred to the General Fund.  In fiscal year 2004, the General Fund amount includes a $75,000,000 lease payment in addition to the transfers from BABLO.  Fiscal year 2005 includes an additional $50,000,000 lease payment.

 

History – Liquor Sales and Operation

The antecedent to the specific Liquor Tax was originally authorized in 1934 with a tax markup determined by the State Liquor Commission for the sale of spirits and wine by the state.  Amended in 1937 to provide a tax at $2.08 per gallon on spirits and 50¢ per gallon on wine.  Amended in 1941 to provide a tax markup of at least 61% which was increased in 1955 to 65%, in 1967 to 75% of the “less carload FOB warehouse price” and in 1994 to 65% of delivered case price.  Amended in 1998 to set a list price for spirits and fortified wine that would return an additional $3,000,000 in General Fund revenue above accepted fiscal year 1999 estimates.  Amended in 1999 to set the now-titled Liquor Tax to generate an aggregate amount sufficient to return to the General Fund an amount substantially equal to the amount collected in prior fiscal year.  As a means of recovering liquor-related costs for state government, the Liquor Tax has now been largely superseded by PL 2003, c. 20, Part LLL which authorized the state to contract with a private entity for the right to distribute spirits for a period of ten years beginning in fiscal year 2005, subject to price regulation by the Bureau of Alcoholic Beverages and Lottery Operations.

 

 

LIQUOR TAXES – 28-A M.R.S.A. Part 4

 

State Liquor Tax – (28-A M.R.S.A. §1651, Sub-§1).  Up until fiscal year 2004, the selling price of all spirits and fortified wine had been used to produce a state liquor tax which was deposited in the General Fund.  The State Liquor Tax was formerly referred to as an Excise Tax on Spirits and was used to recover all liquor-related sales and operations costs of the Bureau of Alcoholic Beverages and Lottery Operations.  This tax has been supplanted by the provisions of 28-A M.R.S.A. §88 which authorized a ten-year lease with a private entity for the sales and distribution of spirits; this function and revenue source is now separately described and tabulated in the Liquor Sales and Operation section of this report.

 

Premium Tax – Spirits – (28-A M.R.S.A. §1703, Sub-§3) A premium is imposed at the rate of $1.25 per 100 proof gallon for all spirits sold in the state.

 

Malt Liquor Tax – (28-A M.R.S.A. §1652, Sub-§1).  An excise tax is imposed on the privilege of manufacturing and selling malt liquor in the state.  The Maine manufacturer or importing wholesale licensee must pay an excise tax of 25¢ per gallon on all malt liquor sold in the state.  In addition to this tax, a premium is imposed at the rate of 10¢ per gallon (See 28-A M.R.S.A. §1703, Sub-§3).

 

Wine Tax – (28-A M.R.S.A. §1652, Sub-§2).  An excise tax is imposed on the privilege of manufacturing and selling wine in the state.  The Maine manufacturer or importing wholesale licensee must pay an excise tax of 30¢ per gallon on all wine other than sparkling wine manufactured in or imported into the state and $1 per gallon on all sparkling wine manufactured in or imported in to the state.  In addition to this tax, a premium is imposed at the rate of 30¢ per gallon on all wine other than sparkling wine and 24¢ per gallon on all sparkling wine (see 28-A M.R.S.A. §1703, sub-§3).  The tax on manufacture or importation of hard cider is 25¢ per gallon with a premium of 10¢ per gallon.

 

Low-alcohol Spirits Tax – (28-A M.R.S.A. §1365; 28-A M.R.S.A. §1652, Sub-§1-A).  An excise tax is imposed on the privilege of manufacturing and selling low-alcohol spirits products and fortified wines in the state.  The Maine manufacturer or importing wholesale licensee must pay an excise tax of $1 per gallon on all low-alcohol spirits products and fortified wines manufactured in or imported into the state.  An additional tax of 30¢ per gallon is imposed on low-alcohol spirits products sold to wholesale licensees in this state by certificate of approval holders who manufacture low-alcohol spirits products.  In addition to this tax, a premium is imposed at the rate of 24¢ per gallon (See 28-A M.R.S.A. §1703, Sub-§3).

 

Liquor Taxes

 

General Fund

 

Fiscal Year

Excise Tax - Beer & Wine

Premium Tax - Beer & Wine

Premium Tax - Spirits

Total All Funds

1998

$7,357,496

$3,318,633

$1,593,834

$12,269,963

1999

$7,466,815

$3,371,354

$1,461,174

$12,299,342

2000

$7,829,053

$3,527,197

$1,581,648

$12,937,898

2001

$7,771,928

$3,524,331

$1,628,788

$12,925,047

2002

$8,196,839

$3,672,891

$1,653,122

$13,522,852

2003

$8,344,712

$3,847,156

$1,676,392

$13,868,260

2004

$8,627,449

$3,997,459

$1,775,223

$14,400,130

2005

$8,707,404

$4,034,350

$1,691,881

$14,433,635

2006

$9,557,003

$4,255,169

$1,883,756

$14,777,779

2007

$10,626,704

$4,433,643

$1,915,563

$16,975,910

 

Revenue Notes – Liquor Taxes

Revenue from Liquor Taxes accrues to the General Fund.  The table above provides detail for each of the Liquor Excise Taxes and Premium Taxes.  Revenue pertaining to operating costs and sales generated by the specific Liquor Tax and the subsequent leasing agreement with a private entity for the distribution of spirits are now included in the Liquor Sales and Operation section of this report.

 

History – Liquor Taxes

The antecedent to the specific Liquor Tax was originally authorized in 1934 with a tax markup determined by the State Liquor Commission for the sale of spirits and wine by the state.  Amended in 1937 to provide a tax at $2.08 per gallon on spirits and 50¢ per gallon on wine.  Amended in 1941 to provide a tax markup of at least 61%, which was increased in 1955 to 65%, in 1967 to 75% of the “less carload FOB warehouse price” and in 1994 to 65% of delivered case price.  Amended in 1998 to set a list price for spirits and fortified wine that would return an additional $3,000,000 in General Fund revenue above accepted fiscal year 1999 estimates.  Amended in 1999 to set the now-titled Liquor Tax to generate an aggregate amount sufficient to return to the General Fund an amount substantially equal to the amount collected in prior fiscal year.  As a means of recovering liquor-related costs for state government, the Liquor Tax has now been largely superseded by PL 2003, c. 20, part LLL, which authorized the state to contract with a private entity for the right to distribute spirits for period of 10 years beginning in fiscal year 2005, subject to price regulation by the Bureau of Alcoholic Beverages and Lottery Operations. 

 

The tax on manufacture or importation of malt liquor was originally enacted in 1933 at 5 1/3¢ per gallon, $1.24 per barrel or varying rates per case based upon the number and volume of bottles per case.  Amended in 1969 to remove wine from state sale and markup and impose tax at the same level in the distribution process as for malt liquor.  A tax on manufacture and importation of wine at distribution level was enacted in 1969.  A tax specific to fortified wine was enacted in 1993 at a rate of $1 per gallon.  A tax specific to low-alcohol spirits was enacted in 1991 at a rate of $1 per gallon and product tax of 30¢ per gallon.

 

The alcohol premium was enacted in 1981 on spirits at the rate of 62 ½ ¢ per gallon, malt liquor at the rate of 5¢ per gallon, table wines at the rate of 15¢ per gallon and sparkling wine at the rate of 12¢ per gallon.  The premium was doubled in 1986.  A premium tax for low-alcohol spirits was added in 1991 and fortified wine was added in 1993, both at a rate of 24¢ per gallon.  Premium revenue was originally dedicated to alcohol prevention, education and treatment.  Revenue was undedicated in 1990.  28-A M.R.S.A. §1703, subsection 5 requires an appropriation to the Office of Substance Abuse equal to premium revenues.

 

 

LIQUOR LICENSE FEES – 28-A M.R.S.A. Part 3

 

In addition to the collection of beer and wine excise taxes, the Department of Public Safety collects a variety of license fees related to the selling and serving of alcoholic beverages.  The Bureau of Liquor Enforcement regulates the operation of licensed premises and licenses approximately 6,000 liquor establishments and 300 agency stores.  Table II-2 on the next page provides a comprehensive list of all fees collected by the Bureau of Liquor Enforcement.  In addition to the fees listed in Table II-2, the bureau charges a $10 filing fee for all applications.

 

Liquor License Fees

Fiscal Year

General Fund

Total All Funds

1998

$2,960,814

$2,960,814

1999

$2,904,977

$2,904,977

2000

$3,067,067

$3,067,067

2001

$3,000,776

$3,000,776

2002

$3,005,543

$3,005,543

2003

$3,273,618

$3,273,618

2004

$3,084,894

$3,084,894

2005

$2,998,742

$2,998,742

2006

$3,118,805

$3,118,805

2007

$3,307,496

$3,307,496

 

Revenue Notes – Liquor License Fees

Revenue from the Liquor License Fees accrues to the General Fund.

 

History – Liquor License Fees

Most recently, liquor license fees have been amended by PL 2001, c. 711 which established a fee for reselling agents; PL 2001, c. 20 established a fee for certificates of approval for wine manufacturers who ship less than 120 gallons per year.

 

Table II-2 – Liquor License Fee Schedule

 

License Class

Retail Sales

Description

Amount

Class I*

Spirituous, Vinous & Malt – Airlines; Auditoriums, Bowling Centers; Civic Auditoriums; Class A Restaurants; Clubs with Catering Privileges; Dining Cars & Passenger Cars; Golf Clubs; Hotels; Indoor Ice Skating Clubs; Indoor Racquet Clubs; Performing Arts Centers; Qualified Catering Services; and Vessels

$900

Class I-A*

Spirituous, Vinous & Malt – Hotels – Optional Food

$1,100

Class II*

Spirituous, Vinous & Malt – Airlines; Auditoriums, Bowling Centers; Civic Auditoriums; Class A Restaurants; Clubs with Catering Privileges; Dining Cars & Passenger Cars; Golf Clubs; Hotels; Indoor Ice Skating Clubs; Indoor Racquet Clubs; Performing Arts Centers; Qualified Catering Services; and Vessels

$550

Class III*

Vinous Only – Airlines; Auditoriums; Bed and Breakfasts; Bowling Centers; Civic Dining Cars & Passenger Cars; Golf Clubs; Hotels; Indoor Ice Skating Clubs; Indoor Racquet Clubs; Outdoor Stadiums, Performing Arts Centers; Pool Halls; Qualified Catering Services; Restaurants; and Vessels

$220

Class IV*

Malt Only – Airlines; Auditoriums; Bed and Breakfasts; Bowling Centers; Civic Auditoriums; Class A Restaurants; Clubs with Catering Privileges; Dining Cars & Passenger Cars; Golf Clubs; Hotels; Indoor Ice Skating Clubs; Indoor Racquet Clubs; Outdoor Stadiums; Performing Arts Centers; Pool Halls; Qualified Catering Services; Restaurants; Taverns; and Vessels

$220

Class V*

Spirituous; Vinous & Malt – Clubs without Catering Privileges and Bed and Breakfasts

$495

Class VI*

Off-premise Retailers – Malt Liquor

$200

Class VI-A*

Off-premise Retailers – Malt Liquor – Ship Chandler w/o groceries or stock

$200

Class VII*

Off-premise Retailers – Wine

$200

Class VII-A

Off-premise Retailers – Wine – Ship Chandler w/o groceries or stock

$200

Class X*

Spirituous, Vinous & Malt – Class A Lounges

$2,200

Class XI*

Spirituous, Vinous & Malt – Class A Restaurants/Lounges; Off Track Betting Facilities

$1,500

 

Agency Liquor Stores – (Initial License)

$2,000

 

Agency Liquor Stores – (Renewal)

$300

 

Incorporated Civic Organizations

$50

 

Special Catering Permits

$10

 

Auxiliary Licenses

$100

 

Bottle Club Registrations

$50

 

B.Y.O.B. Functions

$10

 

Special Taste Testing Festival

$20

Wholesale Licenses

 

 

 

Certificates of Approval – Spirituous (Storage Only)

$600

 

Certificates of Approval – Malt

$600

 

Certificates of Approval – Wine

$600

 

Certificates of Approval – Wine (Less than 120 gallons per year)

$100

 

Wholesale – Malt

$600

 

Wholesale Storage – Malt – monthly

$50

 

Wholesale – Wine

$600

 

Wholesale Storage – Wine – monthly

$50

 

Sales Representative

$50

 

Reselling Agent

$50

 

Small Maine Brewers

$50

 

Distillers & Brewers

$1,000

 

Maine Farm Wineries

$50

 

Rectifiers & Bottlers

$1,000

* Note:  Licenses I-XI require a $10.00 filing fee.

 

 

INSURANCE PREMIUM TAX – 36 M.R.S.A. c.357

 

Every insurance company or association doing business or collecting premiums in this state is liable for a tax at the rate of 2% of gross direct premiums, (1% of long-term health care premiums) including annuity considerations, on all policies written in Maine, less allowable deductions.  The tax on insurance placed in the surplus lines insurance market is 3%.  The tax on qualified group disability plans is 2.55% for large domestic insurers and 1% for all other insurers.  Every non-resident insurance company authorized to do business in this state is liable for a tax on all policies written in Maine at the Maine rate or the rate at which a Maine company would be taxed in the state or Canadian province where the non-resident company is domiciled, whichever is greater.  Reduced rates are provided for captive insurers until 2007 when captive insurers become subject to the corporate income tax instead.

 

Insurance Premium Tax

Fiscal Year

General Fund

Total All Funds

1998

$39,153,496

$39,153,496

1999

$37,742,517

$37,742,517

2000

$42,698,686

$42,698,686

2001

$43,576,502

$43,576,502

2002

$55,244,333

$55,244,333

2003

$71,078,089

$71,078,089

2004

$72,206,153

$72,206,153

2005

$75,669,053

$75,669,053

2006

$76,090,900

$76,090,900

2007

$74,427,506

$74,427,506

 

Revenue Notes – Insurance Premium Tax

Revenue from the Insurance Premium Tax accrues to the General Fund.

 

History – Insurance Premium Tax

Adopted in 1874.  The rate on domestic companies was increased from 1% to 2% effective July 16, 1986.  Amended in 1989 to reduce the rate to 1% of long-term health care premiums effective for tax years after 1988.  Amended by PL 1997, c. 496, for tax years commencing on or after 1/1/97, to subject premiums on certain qualified group disability policies written by every insurer, except a large domestic insurer, to a 1% tax.  Premiums on such policies written by every large domestic insurer are subject to a tax of 2.55%.  PL 1997, c. 435 established reduced rates for non-Maine captive insurance companies.  PL 2003, c. 20, Part CC clarified the application of the tax to annuities.  PL 2007, c. 240, Part KKKK moved captive insurance companies from the insurance premium tax to the corporate income tax.

 

 

FIRE INVESTIGATION AND PREVENTION TAX – 25 M.R.S.A. §2399

 

Every insurance company or association doing business or collecting premiums or assessments in Maine is liable, in addition to the insurance company tax, for a tax at the rate of 1.4% of gross direct premiums for fire risks, less allowable deductions.  These funds are used to defray expenses incurred by the Commissioner of Public Safety in fire prevention investigation and educating the public in fire safety and to defray the cost of fire training and education programs at the Maine Community College System (20-A M.R.S.A. Chapter 319).

 

Fire and Investigation Prevention Tax

Fiscal Year

Other Special Revenue Funds

Total All Funds

1998

$2,109,489

$2,109,489

1999

$2,370,159

$2,370,159

2000

$2,163,052

$2,163,052

2001

$2,538,267

$2,538,267

2002

$3,256,319

$3,256,319

2003

$4,891,046

$4,891,046

2004

$3,652,172

$3,652,172

2005

$3,866,037

$3,866,037

2006

$3,867,755

$3,867,755

2007

$4,228,305

$4,228,305

 

Revenue Notes – Fire Investigation and Prevention Tax

Revenue from this tax accrues as dedicated revenue to the Office of the State Fire Marshal within the Department of Public Safety and to the Maine Community College System.

 

History – Fire Investigation and Prevention Tax

Adopted and first imposed February 17, 1939 at 0.5%.  Increased October 3, 1973 to 0.6%.  Increased October 24, 1977 to 0.75%.  Increased March 10, 1983 to 0.95%.  Increased July 17, 1991 to 1.4%.  PL 2001, c. 437 implemented a special assessment equal to 0.4% of gross direct premiums in addition to the regular assessment in fiscal year 2002.  P&S 2001, c. 67 added a special assessment of 0.6% of gross direct premiums in fiscal year 2003 and capped the revenue from the special assessment to $983,000 in fiscal year 2003 and allowed a credit against insurance premium tax for the amount of the fiscal year 2003 special assessment after July 1, 20003.  PL 2003, c. 20, Part Y delayed the insurance premium tax credit until after July 1, 2005.

 

 

INSURANCE REGULATORY ASSESSMENTS AND FEES – 24-A M.R.S.A. §§237 & 601 & 24 M.R.S.A. §2332

 

Every insurance company or health maintenance organization licensed to do business in this state is subject to an annual assessment by the Bureau of Insurance.  The assessment, not to exceed 0.2% of direct premiums written for any biennial period, is in proportion to the direct gross premium written on business in this state during the year ending December 31st immediately preceding the fiscal year for which an assessment is made.  Similarly, every nonprofit hospital or medical service organization and nonprofit health care plans licensed to do business in the state is also assessed by the Bureau of Insurance.  These annual assessments are based on subscription incomes and are not to exceed 0.015% of subscription income for any biennial period.  The proceeds from each assessment process are used to support the costs of the Bureau of Insurance.  There is a minimum assessment of $100.

 

In addition to the Insurance Regulatory Assessment, the Bureau of Insurance is also authorized to assess a number of other license, application, filing and other miscellaneous fees related to its regulation of the insurance industry.  The current fee schedule is available from the Office of Fiscal & Program Review or from the Department of Professional and Financial Regulation website (http://www.maine.gov/pfr/insurance/company/retaliatory_statement.htm).

 

 

Insurance Regulatory Assessments and Fees

Fiscal Year

Other Special Revenue Funds

Total All Funds

1998

$6,971,826

$6,971,826

1999

$1,683,834

$1,683,834

2000

$7,838,131

$7,838,131

2001

$3,649,511

$3,649,511

2002

$8,058,429

$8,058,429

2003

$3,610,681

$3,610,681

2004

$8,367,081

$8,367,081

2005

$3,345,493

$3,345,493

2006

$12,145,574

$12,145,574

2007

$2,117,571

$2,117,571

 

Revenue Notes – Insurance Regulatory Assessments and Fees

Proceeds from insurance regulatory assessments and other insurance license fees accrue as dedicated revenue to the Bureau of Insurance.  No insurance regulatory assessments have been made since fiscal year 2000 due to available balances accumulated to support Bureau of Insurance activities.

 

History – Insurance Regulatory Assessments and Fees

Adopted in 1985.  PL 1993, c. 313 increased the assessment amount for insurance companies from 0.15% to 0.2%.  PL 1997, c. 79 included health maintenance organizations in the assessment requirement of 24-A M.R.S.A. §237 which formerly applied to insurance companies only.

 

 

WORKERS’ COMPENSATION INSURANCE ASSESSMENTS – 39-A M.R.S.A. §154

 

Each insurance company or entity that is authorized to write workers’ compensation policies in this state and that either does business or collects premiums or assessments pays an annual assessment to the Workers’ Compensation Board Administrative Fund which provides funding for the board’s administrative and operating costs.  Assessments for insurance carriers are based on payroll times the filed manual rate times the employer’s current experience modification factor, if applicable.  The only deductible credits that may be included in the calculation are for the $1,000 and $5,000 indemnity deductible and the $250 and $500 medical deductible per 24-A M.R.S.A. §2385 and §2385-A.

 

The assessment is levied by the Workers’ Compensation Board by May 1st of each year.  The assessment is collected from employers by certain insurance companies beginning on July 1st of each year.  Those insurance companies which have an estimated annual payment of more than $50,000 may pay the assessment on a quarterly basis on or before the last day of January and April, the 25th day of June and concluding on the last day of October.  All insurance companies are required to file an adjusted annual return by September 15th for the previous fiscal year.  Insurance companies with an annual assessment estimate of less than $50,000 are required to pay the entire assessment by June 1st of each year.  Self-insured employers must pay the assessment on or before June 1st.

 

The assessments determined by the Board must be distributed between insurance companies or associations and self-insured employers in direct proportion to the pro rata share of disabling cases attributable to each group for the most recent calendar year for which data is available.  By law, the assessments may not be designed to produce more than a set amount for any one fiscal year.  In fiscal year 2006, the assessment cap was set at $8,525,000.

 

Assessments collected exceeding the assessment cap by a margin of more than 10% must be refunded to those who paid the assessment.  Any amount collected above the board’s allocated budget and within the 10% margin must be used to create a reserve of up to ¼ of the board’s annual budget.  Any collected amounts or savings above the allowed reserve must be used to reduce the assessment for the following fiscal year.

 

Workers' Compensation Insurance Assessments

Fiscal Year

Other Special Revenue Funds

Total All Funds

1998

$8,126,555

$8,126,555

1999

$6,921,706

$6,921,706

2000

$6,741,940

$6,741,940

2001

$6,614,809

$6,614,809

2002

$6,667,725

$6,667,725

2003

$4,017,799

$4,017,799

2004

$12,778,682

$12,778,682

2005

$8,638,815

$8,638,815

2006

$8,874,698

$8,874,698

2007

$6,370,295

$6,370,295

 

Revenue Notes – Workers’ Compensation Insurance Assessments

Revenue from the workers’ compensation insurance assessments accrue as dedicated revenue.  Fiscal year 2004 revenue includes $1.2 million in fiscal year 2003 assessments and $3.2 million in fiscal year 2005 assessments.  The actual fiscal year 2004 revenue was $8.4 million.

 

History – Workers’ Compensation Insurance Assessments

Adopted in 1991.  Assessments based on specific percentages with an annual limit of $2,500,000 became effective as undedicated revenue to the General Fund on July 17, 1991, PL 1991, c. 591.  Amended effective January 1, 1993 to dedicate assessments and set an annual limit of $6,000,000 pursuant to PL 1991, c. 885.  Amended 1994 to change assessment requirements and procedures effective April 7, 1994 pursuant to PL 1993, c. 619.  Amended effective May 3, 1995 to change assessment requirements and procedures pursuant to PL 1995, c. 59.  Amended 1997 to increase assessment limit to $6,600,000 effective September 19, 1997 to fund the Worker Advocate program pursuant to PL 1997, c. 486.  Amended by PL 1999, c. 359 to increase the cap to $6,735,000 beginning in fiscal year 2000.  PL 2001, c. 393 set the assessment cap at $7,035,000 in fiscal year 2002.  PL 2001, c. 692 enacted an assessment cap beginning in fiscal year 2003 of $6,860,000.  PL 2003, c. 425 set the assessment cap at $8,390,000 in fiscal year 2004, $8,565,000 in fiscal year 2005 and $8,525,000 in fiscal year 2006.  PL 2007, c. 240, Part LL increased the assessment cap to $9,820,178 beginning in fiscal year 2008, $10,000,000 beginning in fiscal year 2009, $10,400,000 beginning in fiscal year 2010, $10,800,000 beginning in fiscal year 2011 and $11,200,000 in fiscal year 2012.

 

 

SAFETY EDUCATION AND TRAINING ASSESSMENT – 26 M.R.S.A §61

 

An annual levy based on annual workers’ compensation paid losses is assessed on each insurance carrier licensed to issue workers’ compensation insurance in the state and on individual self-insured employers authorized to make workers’ compensation payments directly to their employees.  The assessment is collected as dedicated revenue by the Department of Labor and deposited into the department’s Safety Education and Training Fund to be used for safety education and training programming administered by the department.

 

Safety Education & Training Assessment

Fiscal Year

Other Special Revenue Funds

Total All Funds

1998

$1,887,220

$1,887,220

1999

$1,928,189

$1,928,189

2000

$2,051,670

$2,051,670

2001

$1,885,237

$1,885,237

2002

$1,897,022

$1,897,022

2003

$1,936,939

$1,936,939

2004

$2,079,353

$2,079,353

2005

$1,768,890

$1,768,890

2006

$2,129,375

$2,129,375

2007

$2,249,051

$2,249,051

 

Revenue Notes – Safety Education and Training Assessment

Revenue collected from this assessment accrues as dedicated revenue.

 

History – Safety Education and Training Assessment

Adopted in 1985 by PL 1985, c. 372. 

 

 

FINANCE INDUSTRY FEES AND ASSESSMENTS – 9-A M.R.S.A. ARTICLE VI & 9-B M.R.S.A., c. 21 & 32 M.R.S.A., c. 105

 

Consumer Credit Code Fees – 9-A M.R.S.A. §6-203 – Every creditor, collection agency, credit services organization and credit reporting agency authorized under the provisions of the Maine Consumer Credit Code, or other applicable laws, is required, depending on the type of creditor or organization, to pay certain application, examination and volume fees.  The funds received from these various fees are used to support the operating costs of the Bureau of Consumer Credit Protection.  Volume fees paid by financial institutions are paid to the Bureau of Financial Institutions.  Both agencies are a part of the Department of Professional and Financial Regulation.  See the Bureau of Consumer Credit Protection’s website (www.credit.maine.gov) for additional information about licenses and fees.

 

Banking Fees and Assessments – 9-B M.R.S.A. §214 – Each state chartered financial institution regulated by the Bureau of Financial Institutions is subject to examination by the Bureau at least once in a 36 month period.  The regulated financial institution is assessed by the Bureau for the cost of the examination.  In addition, each state chartered financial institution is subject to an assessment at the annual rate of at least 6¢ for each $1,000 of the total of average assets; the assessment may not be less than $25.  The Bureau is also authorized to levy an annual assessment not to exceed $500 on interstate branches operated by an out-of-state financial institution.  Lastly, non-depository trust companies that are not affiliated with a financial institution are required to pay an annual assessment of at least $2,000 or an amount not to exceed 6¢ for every $10,000 in fiduciary assets.

Securities Act Fees – 32 M.R.S.A. c. 135 (§16302, §16305 & §16410) – The Maine Office of Securities within the Department of Professional and Financial Regulation oversees the registration of securities and the licensing of broker-dealers, agents, investment advisers, and investment adviser representatives.  The $30 annual renewal fee for agents and investment adviser representatives accrues as dedicated revenue to fund the operations of the Maine Office of Securities.  The remainder of the fees collected by the office, which include agent initial license fees, broker-dealer fees, investment adviser fees, investment adviser representative initial fees, securities registration and exemption fees, and federal-covered securities notice filing fees, accrue to the General Fund.

 

Finance Industry Fees and Assessments

Fiscal Year

General Fund

Other Special Revenue Funds

Total All Funds