Chamber opposes department bill that proposes new tax
On Tuesday, February 11, the Joint Standing Committee on Taxation tabled 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). Linda Caprara testified on behalf of the Maine State Chamber in opposition to the bill the week before because it 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 digital products transferred electronically for permanent download. Digital 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 would be subject to 6% service provider tax. In addition, as drafted, it is not clear on whom that tax falls.
The Maine State Chamber testified that, in the event the committee decides to go forward with the legislation, the bill 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. At Tuesday’s work session, Maine Revenue Services said they did not object to the amendment. Without this clarification, the bill would provide a lack of transparency of the tax base and result in multiple layers of tax. Again, the amendment would clarify that the tax applies once and would prevent so-called double taxation of the same service.
The next work session on LD 2011 has not yet been scheduled. If you have any questions, please contact Linda Caprara by calling (207) 623-4568, ext. 106, or by emailing email@example.com.