Taxation committee holds hearing on local option sales tax bills that affect hospitality industry already ravaged by the pandemic

Dealing with the unsurmountable losses during the COVID-19 pandemic should be enough for Maine’s hospitality industry. Yet, On Wednesday, May 5, the Joint Standing Committee on Taxation held a public hearing on two local option tax bills that propose to allow municipalities a path forward for enacting local option sales taxes on lodging, prepared foods, and marijuana products. This would be the beginning of the proverbial “camel’s nose under the tent” scenario for local option taxes.

The Maine State Chamber of Commerce testified in opposition to both of the local option tax bills – LD 1342, An Act to Authorize a Local Option Sales Tax on Lodging and Other Goods and Provide Funding for Tax Abatement and Rental Relief, and LD 1418, An Act to Allow a Local Option Sales Tax on Meals and Lodging. LD 1342 would authorize a municipality to impose a 1% local option sales tax on lodging, if approved by local referendum. LD 1418 would authorize a municipality to impose a 1% local option sales tax, if approved by local voters in referendum, on prepared foods, short term rentals, and marijuana products.  

The Maine State Chamber has long opposed local option sales taxes for a variety of reasons, including:  

• Enacting a local option sales tax increases the total tax burden in the state.  
  
• This bill adds another layer of sales tax to items purchased in the municipalities that enact it.
  
• Local option taxes are nothing more than another way to raise revenue for municipalities and would do nothing to reduce taxes at the local level. After all, any time a municipality needs a new fire truck, a new school, or any new budget item they could simply impose the tax. Municipalities need to focus on spending efficiencies not just continually raising taxes on Maine businesses and Maine people.  
  
• Local option sales taxes hurt small brick-and-mortar businesses.
  
• Many folks buy local to support small brick-and-mortar businesses in their municipalities. Local businesses located in one locale compete with local businesses in another. Businesses located in towns that enact a local option sales tax will be at a competitive disadvantage with businesses in municipalities that do not enact a local option sales tax. It will pit one community against another. The tax will hit their bottom line, and they may not be able to pass the expense on to the consumer, and ultimately, lose sales to neighboring towns that don’t have local option sales tax.
  
• Local option sales taxes impact local economic development efforts.
  
• Municipalities around the state work hard to try to attract businesses to their locales; many hire economic development directors to do just that. This will do nothing to attract businesses but discourage businesses from locating in towns that have additional taxes. This bill will make towns that imposes sales taxes less attractive locations.  
  
• Once local option taxes are in place, they would be virtually impossible to remove because that municipality would become dependent on the revenue.  
  

The work session for these bills will be held on Tuesday, May 11 at 9:00 a.m. If you have any questions, please contact Linda Caprara by calling (207) 458-2133 or (207) 623-4568, ext. 106, or by emailing lcaprara@mainechamber.org.