Technology Tax Credits
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Maine offers tax credits and sales tax exemptions for businesses engaged in certain specialized areas. 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. 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).
Research Expense Tax Credit
The credit is based on a percentage of the federal Credit for Increasing Research Activities. Limitations: 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 can be carried forward for up to 15 years. Form and Instructions (PDF).
Sales Tax Exemptions
Maine state sales tax exemptions are available for manufacturing, R&D, custom computer programming, fuel & electricity, and biotechnology.
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.
Fuel & Electricity For Use In Manufacturing
Manufacturers are exempt from paying 95% of the sales tax on fuel and/or electricity used in the manufacturing operation.
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.