On Thursday, February 6, Linda Caprara testified on behalf of the Maine State Chamber in opposition to LD 2011, An Act to Update Certain Provisions in the Income Tax and Service Provider Tax Laws, a department bill sponsored by Rep. Ryan Tipping (D-Orono).
Specifically, the Maine State Chamber opposed the proposed new section A-2, 36 MRSA, §2551, sub-B of the bill that would impose a new tax on users of streaming services transferred for less than permanent use. Currently, the State imposes a sales-and-use tax on products transferred electronically for permanent download. Services that are just streamed for temporary use are not currently subject to sale and use tax. This bill would codify different treatment for these two types of transactions: one would be subject to 5.5% sales tax; while the other subject to 6% service provider tax. In addition, the way it is drafted, it is not clear who that tax falls on.
The Maine State Chamber testified that, in the event the committee decides to go forward with the legislation, that section should be amended to provide a clear definition of the term “digital audio visual” and “digital audio services.” By adding the definition, it would clarify that the tax applies only once to the “end user” not to additional service provider contractual relationships along the way.
For example, when XYZ cable service provider contracts with a company, such as Disney, for programming, they acquire a license to sell that product(s) for a period of time, it’s not permanent. Programming purchases are a business input. The way this language in the bill is drafted, it is not clear if the tax would apply to both XYZ service provider who purchases the product and XYZ’s customer who streams that movie. Without clarification, this would have a lack of transparency of the tax base and result in multiple layers of tax. Again, this amendment would clarify that the tax applies once and would prevent so-called double taxation of the same service.
Even though the Maine State Chamber opposes this new tax, there are issues of fairness and of providing a level competitive playing field, so it’s a double-edged sword. The same services are subject to the tax based upon the technology used for delivery and not the type of service provided. So currently, there is not tax parity between services.
The work session on LD 2011 will be held on Tuesday, February 18 at 1:00 p.m. in Room 127 of the Statehouse. If you have any questions, please contact Linda Caprara by calling (207) 623-4568, ext. 106, or by emailing email@example.com.