MEASURE WOULD GIVE MUNICIPALITIES OPTION OF IMPOSING LOCAL SALES TAX

Optional sales tax provides towns with “tool” to help control local budgets

AUGUSTA –  Today, a measure that grants towns the option of imposing a local sales tax received strong support in a public hearing in the Taxation Committee.

The bill, LD 594, “An Act To Allow the Creation of a Local Option Sales Tax by Referendum,” sponsored by Senator Linda Valentino, is strictly optional and requires a petition to be filed and signed by a set number of voters asking for a local referendum on the matter.

Sen. Linda Valentino of Saco

“It is time we give municipalities what they have been asking for – another “tool” to help with their local budgets,” said Senator Valentino of Saco. “In light of major proposed tax changes in the budget, this is the perfect time to include a local option tax provision. It will enable a municipality to reduce its reliance upon both the state and local property taxes.”

In order for the referendum to be valid, at least 20 percent of those who voted in the last gubernatorial election must turn out to vote. In addition, voters can at any time call for another referendum by the petition process to repeal the tax.

The highest additional local option tax to be added on to the state base is 1%. The additional local tax would be paid at time of purchase or service and forwarded to Maine Revenue Services (MRS). MRS would take a handling fee of 2% of the local tax generated and then send the rest back to the municipality on a monthly basis.

Maine is one of twelve states where municipalities or counties don’t have the right to impose a local option sales tax. Neighboring states such as Massachusetts, Rhode Island, and Vermont all allow local option hotel taxes.

“This measure does not mandate anything,” added Senator Valentino. “ It is the option of the people who live in the town.  It is their local budget and their property taxes that are being affected.

Last session, a similar bill by Rep. MacDonald of Old Orchard Beach, was passed by the House last session in a 101 to 48 vote, but failed in the Senate.

The County Commissioners Association, Service Center Communities Coalition, and a number of municipal leaders all testified in favor of the measure. The Taxation Committee will be holding a work session on LD 594, “An Act To Allow the Creation of a Local Option Sales Tax by Referendum,” in the coming weeks.

###