An Act To Reform the Tax Laws
Maine Legislature, Session 121, LD 1338
Committee: Taxation
Sponsors: DUNLAP
Amends: 36 MRSA §508, 36 MRSA §1817, 36 MRSA §5116

Legislative Document 
No. 1338 
H.P.983 
House of Representati ves, March 12, 2003 
An Act To Reform the Tax Laws 
Reference to the Committee on Taxation suggested and ordered printed. 
Presented by Representative DUNLAP of Old Town. 
11'/~ /h.7Jl~ 
MILLICENT M. MacFARLAND 
Clerk 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 20·A MRSA §15622 is enacted to read: 
§lS622. 
Local option 
The 
commissioner shall reduce 
the total allocation to 
a 
municipality under this chapter and chapter 606-A by an amount 
equal to the transfer of funds by the Treasurer of State to the 
municipality pursuant to Title 36, section 1817 or 5116, 
Sec. 2. 36 MRSA §508 is enacted to read: 
§S08. 
Local option 
A municipality that receives 
revenue pursuant to section 
1817 or 5116 that exceeds the total allocation the municipality 
would have otherwise received under Title 20-A, chapters 606 and 
606-A must reduce the tax levied in the municipality under this 
part by the amount that the revenue exceeds the allocation. 
The 
reduction of the tax under this Part pursuant to this section 
must be applied on a pro rata basis to every taxable property 
under this Part in the municipality. 
Sec.3. 36 MRSA §1817 is enacted to read; 
§18l1. 
Local option sales and use tax 
1. 
Municipalities authorized to adopt. 
If the legal voters 
of a municipality give their approval in a referendum vote, the 
legislative body of that municipality may impose a local option 
sales and use tax on all of the transactions subject to the tax 
imposed under this chapter. 
The local option sales and use tax 
is at the same rate as and replaces the sales and use tax under 
this Part. 
2. 
Notify assessor. 
A municipality that imposes a local 
option sales and use tax under this section shall notify the 
assessor at least 90 days before the local tax is effective. 
3. 
Administered by State. 
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 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 15% and certify the net amount due 
each municipality to the Treasurer of State and the Commissioner 
of Education. 
The Treasurer of State shall make monthly payments 
to municipal treasurers of the net amounts certified by the 
assessor under this subsection. 
Revenue collected pursuant to 
this section is not considered to be receipts from the taxes 
imposed under this Part for purposes of transfers to the Local 
Government Fund under Title 30-A, section 5681. 
5. 
Use of local sales and use tax revenue. 
The revenue 
raised by the adoption of a local option sales and use tax must 
be expended by the municipality in the same manner that the 
municipality expends general purpose aid for local schools under 
Title 20-A, chapters 606 and 606-A. 
6. 
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 towns 
and plantations must be held and conducted in accordance with 
Title 30 A, sections 2528, 2529 and 2532 even if the municipality 
has not accepted the provisions of section 2528. 
The voting at 
elections 
in municipalities 
must 
be 
held 
and 
conducted 
in 
accordance with Title 21-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 is the referendum 
adopting the tax under this section. 
7. 
Effective date of tax. 
The tax authorized by this 
section takes effect 120 days after the municipal referendum vote 
if it is accepted by a majority of the local voters voting at the 
election and the total number of votes cast for and against the 
acceptance of the local option sales and use tax equals or 
exceeds 
20% 
of 
the 
total 
number 
of 
votes 
cast 
in 
that 
municipality in the most recent gubernatorial election. 
Sec. 4. 36 MRSA §5116 is enacted to read: 
§5ll6. 
Local option income tax 
1. 
Municipalities authorized to adopt. 
If the legal voters 
of a municipality give their approval in a referendum vote, the 
legislative body of that municipality may impose a local option 
income tax 
on the income of a 
taxpayer subject to the tax 
imposed under this chapter. 
The local option income 
tax is 
computed at the same rate as and replaces the income tax under 
this chapter. 
2. 
Notify assessor. 
A municipality that imposes a local 
option income tax under this section shall notify the assessor at 
least 90 days before the local tax is effective. 
3. 
Administered by State. 
A taxpayer in a municipality 
that has imposed a local option income tax under this section 
_shall pay that tax at the time of and in the manner provided for 
l2tb~ 
__ -p-ayment of state income tax. 
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 15'l-o and certify the net amount due 
each municipality to the Treasurer of State and the Commissioner 
of Education. 
The Treasurer of State shall make monthly payments 
to municipal treasurers of the net amounts certified by the 
assessor under this subsection. 
Revenue collected pursuant to 
this section is not considered to be receipts from the taxes 
imposed under this Part for purposes of transfers to the Local 
Government Fund under Title 30-A, section 5681. 
5. 
Use of income tax revenue. 
The revenue raised by the 
adoption of a local option income tax must be expended by the 
municipali ty in the same manner that the municipality expends 
general purpose aid for local schools under Title 20-A, chapters 
and 606-A. 
6. 
Referendum. 
The question of whether to impose a local 
option income tax must be submitted to the legal voters of a 
municipality that seeks to impose the local option income tax. 
The petition process and the voting at elections held in towns 
and plantations must be held and conducted in accordance with 
Title 30-A, sections 2528, 2529 and 2532 even if the municipality 
has not accepted the provisions of section 2528. 
The voting at 
elections held in municipalities must be held and conducted in 
accordance with Title 21-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 income tax may be discontinued by referendum 
conducted in the same manner as is the referendum adopting the 
tax under this section. 
7. 
Effective date of tax. 
The 
tax authorized by this 
section takes effect 120 days after the municipal referendum vote 
if it is accepted by a majority of the local voters voting at the 
election and the total number of votes cast for and against the 
acceptance of the local option income tax equals or exceeds 20°1> 
of the total number of votes cast in that municipality in the 
most recent gubernatorial election. 
SUMMARY 
This bill provides for a local option sales and use tax and 
a local option income tax at the same rates as and to replace the 
state sales and use tax and income tax, 
85% 
of the proceeds of 
which the municipality would receive, to be approved by municipal 
referendum. 
The general purpose aid for local schools that a 
municipality receives 
from the State will be 
reduced by 
the 
amount the municipality receives through the local option taxes. 
If a municipality receives more through the local option taxes 
than the amount the municipality would have received through the 
general purpose aid for local schools, then the municipality must 
reduce property taxes by the excess amount, applied pro rata to 
all of the taxable property in the municipality.