Maine’s “Other” Taxes Reportable on Form 1040-ME

(Non-Income Tax Reporting Requirements for Individuals)
By Merrill Barter, Tax Director
March 2013

As another Maine individual income tax filing deadline looms, I thought it wise to provide a quick refresher regarding the reporting of Maine’s use tax and sales tax on rentals of living quarters.  Both of these taxes can be reported on your 2012 Maine income tax return, thereby escaping the need to file a separate tax return, if certain requirements are met.

Use Tax
Maine’s use tax applies to purchases of items that are subject to sales tax, but on which no sales tax was charged.  Some examples of situations that could result in a use tax liability are:

  • You purchase items from an internet retailer for use in Maine, such as computers, software, or clothing, and the retailer does not charge sales tax.
  • You purchase a new television from a New Hampshire retailer for use in Maine.
  • A Maine taxpayer purchases jewelry for his wife from a New York store, and has it shipped to their home in Maine (no New York tax should apply, as the item was shipped outside the State).

If items are purchased without paying the appropriate Maine sales tax, then use tax must be “self-assessed” at the rate of 5% of the purchase price of the item, and reported on line 30 of your Maine tax return.  If you do not know the amount of purchases made during the year, an estimate of the use tax can be computed by multiplying your Maine adjusted gross income by .08% (.0008), or by using the table in the Maine individual income tax instruction booklet.

There are some special rules that apply to larger purchases:

  • If you purchased items that cost $1,000 or more (per item), the tax on these items must be computed separately and added to the tax computed using the percentage or table.
  • If an individual item is purchased with a cost of more than $5,000, the purchase and related tax must be reported on an individual use tax (IUSE) return.  The return must be filed with payment by the 15th day of the month following the month of the purchase.  The IUSE return can be found at http://www.maine.gov/revenue/forms/sales/IUse2011.pdf

Sales Tax on Rentals of Living Quarters
Maine imposes a 7% sales tax on rentals of living quarters.  This includes the rental of a summer cottage, a single room or a rental unit.  Generally, a person who owns only one rental unit and rents it for less than 15 days each calendar year does not need to collect the sales tax.  However, if a rental agency is employed to rent the unit, the agency will be required to charge and collect the tax.

The rental of living quarters to any person who rents continuously for 28 days or more is exempt from sales tax, as long as the living quarters are the person’s primary residence, or are rented in connection with education or employment.

If a taxpayer who owns a single rental unit rents it for 15 days or more, he or she must register with Maine Revenue Services and charge (and remit) the 7% tax.  If the tax collected is $2,000 or less, it can be reported on line 30a of the Maine 1040, and the taxpayer will not need to file separate sales tax returns.  If the tax collected is more than $2,000, the taxpayer owns more than one rental unit, or the taxpayer does not directly own the unit being rented, separate sales tax returns must be filed.  The filing frequency of the sales tax returns will depend on the amount of tax collected.  For more information related to the sales tax on the rental of living quarters, visit http://www.maine.gov/revenue/salesuse/returnlink.htm.

For more information, please contact Merrill Barter.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

IRS CIRCULAR 230 DISCLOSURE:
Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.  Please contact us if you wish to have formal written advice on this matter.