An Act To Allow Municipalities To Provide Property Tax Relief through a Local Option Sales Tax
Maine Legislature, Session 121, LD 1333
Committee: Taxation
Sponsors: STRIMLING, LEMOINE, NORBERT, PERRY
Amends: 36 MRSA §1817

Legislative Document 
No. 1333 
S.P.435 
In Senate, March 12,2003 
An Act To Allow Municipalities To Provide Property Tax Relief 
through a Local Option Sales Tax 
Reference to the Committee on Taxation suggested and ordered printed. 
Presented by Senator STRIMLING of Cumberland. 
Cosponsored by Representative LEMOINE of Old Orchard Beach and 
Representatives: NORBERT of Portland, PERRY of Bangor. 
Printet.l on recyded p:lpt!r 
JOY J. O'BRIEN 
Secretary of the Senate 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 36 MRSA §1817 is enacted to read: 
§1817. Municipal local option sales and use tax 
1. 
Definitions. 
As 
used 
in this 
section, 
unless 
the 
context 
otherwise 
indicates, 
the 
following 
terms 
have 
the 
following meanings. 
A. 
"Adjusted property tax rate" means 
a 
municipality's 
property tax rate per $1,000 of assessed valuation, adjusted 
for 
inflation 
using 
the 
Consumer 
Price 
Index 
and 
any 
neighborhood or municipality revaluations. 
B. 
"Eligible 
municipality" 
means 
a 
municipality 
or 
organized municipal township. 
"Eligible municipality" does 
not include a county or a subsidiary unit of government such 
as an unorganized township, village, 
special district or 
school district. 
C. 
"Local option sales and use tax" means the sales and use 
tax 
imposed 
by 
an 
eligible 
municipality 
pursuant 
to 
subsection 2. 
D. 
"Participating county" means a county in which there are 
one or more participating municipalities. 
E. 
"Participating 
municipality" 
means 
an 
eligible 
municipality that has imposed a local optio_n sales and use 
tax pursuant to this section. 
F. 
"Sales tax base" means those items subject to sales 
taxation under this Part. 
G. 
"Single transaction limitation" 
mei;!n~~Qllar limit 
that a municipality that imposes a local __ -ill?-tlon_~les and 
-"'u""s'-"'e'--t"'-a ...... 
x--.l:p~u"'-'r"--'s"'-u"'"""a ... 
n~t'--'t~o"---"'t""h...,.i'--"s'---'s .... e"'-"'c."t""i'"o'-'-n"--'m~a .. 
y--.l:p"-'l~a""c,,_e"'----"'o~n'--t~he amo un t 
f 
tax the municipality collects 
from 
a 
single transaction 
subject to the local option tax. 
2. 
Authorization to i~e local opj:.ion Sj)],_e_!',! __ ~d_use t~_,,-
An eligible municipality may impose a local option sales and use 
tax of l~ on those items that are Q§JLt~h~~~J~p tax base. 
An 
eligible municipality that 
adopts 
alocal_~pJ~_ioIl __ !iales 
tax 
pursuant to this section may not al te~h€LLQngEL9J;:_~tems subk~t 
to sales taxation. 
A municipality tpat 
a~--ill?-ts a 
local op!:.ion 
sales 
and 
use 
tax ____ ~SL~y-_-adQPt---~--s).-ng,1~--m-tr::j;1nsactim1 
limitation. 
The single transaction limitatioIL may __ pot exceed 
$100. 
Page l-LR0577(1) 
3. 
Administration. 
Retailers in a municipality that has 
imposed a local option sales and use tax under this section shall 
transfer the revenue from that tax at the time of and in the 
manner provided in section 1951 A for the transfer of state sales 
and use tax revenue. 
The tax is subject to the same interest, 
penalties and administrative actions 
as other taxes 
assessed 
under this Part. 
4. 
Transfer of revenue. 
Each month, 
the assessor shall 
identify the amount of revenue attributable to each municipality 
under this section, subtract the costs of administering this 
section and certify the net amount due each municipality to the 
Treasurer of State. 
Of the net amount certified under this 
subsection, the Treasurer of State shall make monthly payments to: 
A. 
The treasurer of a participating municipality in the 
amount 
of 
75% 
of 
the 
net 
amount 
collected 
from 
that 
participating municipality: and 
B. 
The treasurer of a participating county in the amount of 
25% 
of 
the 
net 
amount 
collected 
from 
participating 
municipalities within that county. 
For purposes of this subsection, "costs of administering this 
section" means the lesser of the actual cost to the assessor and 
2% of the total revenue generated by local option sales and use 
taxes. 
5. 
Disposition 
of 
participating 
county 
share. 
Each 
participating county shall deposit the revenue received pursuant 
to subsection 4, paragraph B in a segregated account. 
A county 
shall 
determine 
its 
annual 
budget 
and 
assessment 
without 
consideration of the amount received pursuant to subsection 4, 
paragraph B. 
Funds within the segregated account may only be 
used by the county to reduce on a pro rata basis the property tax 
assessment required from each participating municipality within 
the participating county. 
6. 
Disposition of participating municipality share. 
Each 
participating municipality shall deposit the 
revenue 
received 
pursuant to subsection 4, paragraph A in a segregated account. 
A 
municipality shall determine its annual budget and assessment 
without 
consideration 
of 
the 
amount 
received 
pursuant 
to 
subsection 4, paragraph A. 
Funds within the segregated account 
may be used only as provided in this subsection. 
A. 
As the first priority, the participating municipality 
shall use at least 50% of the funds annually deposited in 
the 
segregated 
account 
to 
stabilize 
or 
lower 
that 
municipality's projected property tax rate. 
If, despite the 
application of at least 50% 
of the funds, 
the 
combined 
effect of changes in the municipality's appropriations and 
revenue streams results in a projected adjusted property tax 
rate that exceeds the previous tax year's actual tax rate by 
more than 1%, then whatever portion of the remaining amount 
of segregated funds must be applied to maintain the adjusted 
property tax rate at or below lOP'!> of the previous year' s 
property tax rate. 
Notwithstanding any prov1s1on to the 
contrary, if a municipality uses all of the funds in the 
segregated account and the adjusted property tax rate is 
more than 1% above the previous year' s property tax rate, 
the final municipal budget containing the higher adjusted 
property tax may be adopted only by 
a 
2/3 vote of the 
governing body of that municipality. 
B. 
As the 2nd priority, after compliance with paragraph A, 
the 
municipality 
may 
use 
any 
funds 
remaining 
in 
the 
segregated account for 
economic 
development purposes: 
to 
augment school budgets; to improve local roads, sewers and 
other infrastructure of the municipality: or for any other 
permissible 
spending 
or 
budgetary 
needs 
of 
the 
municipality. 
Remaining 
funds 
may 
be 
committed to meet 
annual budgetary or long-term capital investment needs of 
the municipality. 
7. 
Effect on revenue sharing and other state aid programs. 
Revenue received pursuant to subsection 4 may not be considered 
to be receipts from the taxes imposed under this Part for the 
purpose of transfers to the Local Government Fund under Title 
A, 
section 5681. 
Revenue received pursuant to subsection 4 
may not be used to reduce or eliminate any funding otherwise due 
the county or municipality under any provision of law providing 
aid to the participating county or participating municipality, 
including, but not limited to, aid to schools, 
roads, public 
assistance or jails. 
8. 
Referendum. 
The question of whether to impose a local 
option sales and use tax must be submitted to the legal voters of 
a municipality that seeks to impose the local option sales and 
use tax. 
The petition process and the voting at elections held in cities, 
towns and plantations must be held and conducted in accordance 
with Title 
A, 
sections 
2528, 
2529 
and 
2532 
even if the 
municipality has not accepted the prov1s1ons of section 2528. 
The voting at elections held in municipalities must be held and 
conducted in accordance with Title 2l-A. 
The municipal clerk shall make a return of the results, certify 
the results 
and 
send 
them 
to 
the 
Secretary of State. 
The 
Secretary of State shall forward the results to the assessor. 
The 
local option sales 
and 
use 
tax 
may 
be discontinued by 
referendum 
conducted 
in 
the 
same 
manner 
as 
the 
referendum 
adopting the tax under this section. 
9. 
Effective date of tax. 
The 
tax authorized by this 
section takes effect 120 days after the municipal referendum vote 
under subsection 8 if it is accepted by a majority of the local 
voters voting at the election and the total number of votes cast 
equals or exceeds 20% of the total number of votes cast in that 
municipality in the most recent gubernatorial election. 
SUMMARY 
This bill allows municipalities to impose a 1% local option 
sales and use tax. 
Revenue from the tax, after the deduction of 
administrative costs, is divided between the municipality and the 
county in which the municipality is located on a 75/25 basis, 
respectively. 
A municipality must use the revenue generated by the local 
option sales and use tax to reduce the property tax rate. 
If, 
despite the use of all the revenue generated by the local option 
sales and use tax, the property tax rate, after adjustment for 
inflation, can not be decreased below a level that is 19'0 higher 
than 
the 
previous year's property tax rate, 
then this bill 
requires a 213 vote of the governing body of the municipality to 
pass the budget containing the higher tax rate.