Maine offers tax credits and sales tax exemptions for businesses engaged in certain specialized areas.
Research Expense Tax Credit
In general, R&D tax credits are based on federal IRS rules and applied for as part of a company’s state corporate tax return. The credit is based on a percentage of the federal Credit for Increasing Research Activities. The credit is limited to 5% of the excess qualified research expenses over the previous three-year average plus 7.5% of the basic research payments under IRC § 41(e)(1)(A). The credit is further limited to 100% of the first $25,000 in tax liability plus 75% of the tax liability in excess of $25,000. The credit cannot be carried back, but it can be carried forward for up to 15 years. Form and Instructions (PDF).
Renewable Chemicals Tax Credit
The State of Maine offers a tax credit at $0.08 per pound for the production of renewable chemicals, which are defined to be no less than 95% biobased content; to include chemicals, polymers, plastics and formulated products; and to exclude substances used for food, feed, or fuel, with limited exceptions. Eligibility for this tax credit is certified by DECD. This credit may be carried over for up to 10 years. View the Renewable Chemicals Tax Credit statute.
Biofuels Production Tax Credit
The State of Maine offers a tax credit of $0.05 per gallon for the production of biofuels. The credit is available to biofuel producers who are certified by the Department of Environmental Protection. This credit may be carried over for up to 10 years. View the Biofuel Production Tax Credit statute. Use this worksheet (PDF) to claim the tax credit.
Maine Renewable Energy Equipment Tax Exemption
Solar and wind energy equipment, except that of industrial power suppliers, is exempt from local property tax. Taxpayers must apply for the credit by April 1 of the first year the exemption is requested. Find the application form here (PDF).
Sales Tax Exemptions
Maine state sales tax exemptions are available for manufacturing, R&D, custom computer programming, fuel & electricity, and biotechnology. Sales tax exemptions are applied either at the time of purchase using an Industrial Users Blanket Sales Tax Certificate of Exemption (PDF) or as a refund with the Refund Form (PDF).
Sales of machinery and equipment used by the purchaser directly and primarily in the production of tangible personal property for later sale or use is eligible for a sales tax exemption. In addition, items consumed or destroyed directly or primarily in production and repair and replacement parts for qualified production equipment are exempt from sales tax. Also, any manufacturer is exempt from paying 95% of the sales tax on fuel and/or electricity used in the manufacturing facility.
Research and Development
Sales of machinery and equipment used by the purchaser directly and exclusively in research and development is eligible for a sales tax exemption.
Custom Computer Programming
Any custom computer programming purchased by a business is exempt from sales tax. If a standard program is purchased, then customized, the cost of the standard program would be taxable and the customizing, if separately stated, would be nontaxable.
Sales of machinery, equipment, instruments, and supplies used by the purchaser directly and primarily in a biotechnology application are eligible for a sales tax exemption.
Commercial Agricultural and Aquacultural Production
Sales of feed hormones, pesticides, antibiotics, and medicines used in commercial agricultural or aquacultural production are exempt from sales or use tax. Sales of fertilizer, seed, defoliants, insecticides, weed killers, fuel, electricity, and depreciable machinery and equipment are also exempt from sales or use tax. The sale of breeding stock and other activities existing under animal agricultural production are also exempt from sales tax.