An Act To Modernize the State's Tax System
Maine Legislature, Session 121, LD 1394
Committee: Taxation
Sponsors: DUDLEY, DOUGLASS, DUPLESSIE, FAIRCLOTH, PINGREE, RICHARDSON, SIMPSON, BRENNAN, STRIMLING
Amends: 36 MRSA §6201, 36 MRSA §6207, 36 MRSA §6221, 36 MRSA §1752, 36 MRSA §1760, 36 MRSA §1811, 36 MRSA §6652, 36 MRSA §6651

Legislative Document 
No. 1394 
H.P.1020 
House of Representati ves, March 19, 2003 
An Act To Modernize the State's Tax System 
Reference to the Committee on Taxation suggested and ordered printed. 
Presented by Representative DUDLEY of Portland. 
Cosponsored by Senator DOUGLASS of Androscoggin and 
--m~ 
frJ.1JlP£~ 
MILLICENT M. MacFARLAND 
Clerk 
Representatives: DUPLESSIE of Westbrook, FAIRCLOTH of Bangor, PINGREE of North 
Haven, RICHARDSON of Brunswick, SIMPSON of Auburn, Senators: BRENNAN of 
Cumberland, STRIMLING of Cumberland. 
Printed on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
PART A 
Sec. A-I. 36 MRSA §S219-W is enacted to read: 
§52I9-W. 
Maine Residents Property Tax Program credit 
A refundable credit is allowed against the taxes imposed by 
this Part in the amount of benefits allowed under chapter 907. 
This credit is not available if the taxpayer has filed a separate 
application for benefits under chapter 907. 
Sec. A-2. 36 MRSA §6201, sub-§ll-A, as amended by PL 1999, c. 
401, Pt. R, §1 and affected by §2, is further amended to read: 
II-A. 
Rent 
constitutinq 
property 
taxes 
accrued 
for 
nonelderly household. 
"Rent constituting property taxes accrued 
for 
nonelderly 
household" 
means 
18% 
25" of 
the 
gross 
rent 
actually paid in cash or its equivalent in any tax year by a 
claimant and the claimant's household solely for the right of 
occupancy of their Maine homestead in the tax year and which rent 
constitutes the basis, in the succeeding calendar year, of a 
claim for relief under this chapter by the claimant. 
Sec. A-3. 36 MRSA §6207, sub-§l, as amended by PL 1997, c. 
557, Pt. A, §3 and affected by Pt. G, §1, is repealed. 
Sec. A-4. 36 MRSA §6207, sub-§l-A is enacted to read: 
I-A. 
Benefit calculation. 
For claimants 
representing 
a 
nonelderly household, the benefit is 100" of that portion of the 
benefit base that exceeds: 
A. 
Beginning Janyary I, 2QQ4 ang enging Deceml:!er 31, 2004, 
3" of income: 
B. 
Beginning Janyary 1. 2QQ5 ang enging Deceml:!er 31. 2QQ5. 
2.aS" Qf incQme; 
C. 
Beginning Janyary 1. 2Q06 ang ending Deceml:!er 31. 2006. 
2.7" of incQme; ang 
D. 
Beginning Janyary 1, 2Q07, 2.5" Qf inCQme. 
Sec. A-S. 36 MRSA §6207, sub-§2, as amended by PL 1997, c. 
557, Pt. A, §3 and affected by Pt. G, §1, is further amended to 
read: 
2. 
IncolIIe 
eligibility. 
Single-member 
households 
with 
household incomes in excess of 
$~lh7gg $45,000 and households 
with 2 or more members with a household income in excess of 
$4Q T QQQ $75,000 are not eligible for a benefit. 
Sec. A-6. 36 MRSA §6207, sub-§S is enacted to read: 
5. 
Mad.lllUJll benefit. 
The maximum benefit available under 
this section is $6,000. 
Sec. A-7. 36 MRSA §6221 is enacted to read: 
§6221. 
Income taz credit Qption 
A person eligible for benefits under this chapter may elect 
to receive those benefits as 
a 
credit against income tax as 
provided in section 5219 W if the credit is claimed on the 
claimant's annual income tax return. 
PARTB 
Sec. B-1. 30-A MRSA §S681, sub-§S, ,.,A and B, as amended by PL 
2001, c. 714, Pt. Y, §1, are further amended to read: 
A. 
For months beginning before July 1, 2003, 
5.1~; aRa 
B. 
For months beginning on or after July 1, 
2003, 
IDU;, 
before October 1, 2003, 5.2~T~ 
Sec. B-2. 30-A MRSA §S681, sub-§S,'C is enacted to read: 
c. 
For months beginning on or after October 1, 2003, 
8.5~. 
PARTC 
Sec. C-l. 36 MRSA §SIII, sub-§I-B, as enacted by PL 1999, c. 
731, Pt. T, §3, is amended to read: 
I-B. 
Single individuals and married persons filing separate 
returns; tax years beginning 2003. 
For tax years beginning on or 
after January 1, 
~Qg~ l.Q.Q1, 
for single individuals and married 
persons filing separate returns: 
If Maine ~aHaale taxable income is: 
Less than $4,200 
The tax is: 
2~ of the Maine 
taxable income 
At least $4,200 but 
less than $8,350 
At least $8,350 but 
less than $16,700 
At least $16,700 9F-ffi9Fe 
but less than $100,000 
$100,000 or more 
$84 plus 4.5°", of 
the excess over 
$4,200 
$271 plus 7% of 
the excess over 
$8,350 
$856 plus 8.5°'1> 
of the excess 
over $16,700 
$7,937 plus 10°'1> 
of the excess 
oyer $100,000 
Sec. C-2. 36 MRSA §Slll, sub-§2-B, as enacted by PL 1999, c. 
731, Pt. T, §5, is amended to read: 
2-B. 
Beads of households; tax years beginninq 2003. 
For 
tax years beginning on or after January 1, 
agga 
~, for 
unmarried 
individuals 
or 
legally 
separated 
individuals 
who 
qualify as heads of households: 
If Maine ~aHasle taxable income is: 
Less than $6,300 
At least $6,300 but 
less than $12,500 
At least $12,500 but 
less than $25,050 
At least $25,050 9F-m9Fe 
but less than $150,000 
$150,000 or more 
The tax is: 
2% of the Maine 
taxable income 
$126 plus 4.5% 
of the excess 
over $6,300 
$405 plus 7% of 
the excess over 
$12,500 
$1,284 plus 8.5% 
of the excess 
over $25,050 
$11,905 plus 10% 
of the excess 
over $150,000 
Sec. C-3. 36 MRSA §Slll, sub-§3-B, as enacted by PL 1999, c. 
731, Pt. T, §7, is amended to read: 
3-B. 
Individuals filing aarried joint return or surviving 
spouses; taz years beginning 2003. 
For tax years beginning on or 
after January 1, agga ~, for individuals filing married joint 
returns or surviving spouses permitted to file a joint return: 
If Maine ~aHa91e taxable income is: 
Less than $8,400 
At least $8,400 but 
less than $16,700 
At least $16,700 but 
less than $33,400 
At least $33,400 eF-meFe 
but less than $200,000 
$200,000 or more 
The tax is: 
2'- of the Maine 
taxable income 
$168 plus 4.5'-
of the excess 
over $8,400 
$542 plus 7'- of 
the excess over 
$16,700 
$1,711 plus 8.5% 
of the excess 
over $33,400 
$15,872 plus 10% 
of the excess 
over $200,000 
Sec. C-4. 36 MRSA §S126, as amended by PL 2001, c. 583, §16, 
is repealed and the following enacted in its place: 
§5l26. 
Personal exemptions 
For tax years beginning on or after January It 2003, 
a 
resident individual is allowed an amount for each exemption that 
is egual to the amount allowed for an exemption under the Code. 
Sec. C-S. 36 MRSA §S219-S, as enac ted by PL 1999, c. 731, Pt. 
V, §l and affected by §2, is amended to read: 
§52l9-S. 
Earned income credit 
A taxpayer is allowed a refundable credit against the taxes 
otherwise due under this Part equal to 
9% ~ of the federal 
earned income credit for the same taxable year. 
~he--EH"-ed-i-t:--may 
Be~-FeaQee-~Re-s~a~e-iBeeme-~aH-~e-less-~RaB-BeFeT 
Sec. C-6. 
Application. 
This 
Part 
applies 
to 
tax 
years 
beginning on or after January 1, 2003. 
PARTD 
Sec. D-l. 36 MRSA §1752, sub-§l-H is enacted to read: 
I-H. 
Construction services. 
"Construction services" means 
services provided in this State to the general public by a person 
engaged in the activity of building. 
The activity of building 
pertains to any building. highway. 
road. railroad. excavation, 
manufactured building or other structure and involves any act of 
construction. 
alteration. 
repair. 
substantial 
maintenance. 
addition 
to. 
subtraction 
from, 
improvement. 
movement 
or 
demolition. 
or 
the 
construction 
of 
scaffolding 
or 
other 
structures 
or 
work 
related 
to 
the 
activity 
of 
building. 
"Construction services" includes. but is not limited to. 
the 
services typically provided by building contractors. 
road and 
driveway 
contractors. 
concrete 
contractors. 
excavators. 
carpenters. 
masons. 
electricians. 
plumbers. 
roofers. 
siding 
applicators and house painters. 
Sec. D-2. 36 MRSA §1752, sub-§5-C is enacted to read: 
5-C. 
Legal services. 
"Legal services" means professional 
services 
provided 
by 
an 
attorney-at-law 
and 
that attorney's 
support staff. 
Sec. D-3. 36 MRS A §1752, sub-§ll, 1JA, as enacted by PL 1989, 
c. 871, §5, is amended to read: 
A. 
"Retail sale" includes: 
(1) 
Conditional sales, installment lease sales and any 
other transfer of tangible personal property when the 
title is retained as security for the payment of the 
purchase price and is intended to be transferred later; 
aBa 
(2) 
Sale of products for internal human consumption to 
a 
person 
for 
resale 
through 
coin-operated 
vending 
machines when sold to a retailer whose gross receipts 
from 
the retail sale of tangible personal property 
derived through sales from vending machines are more 
than 50'\ of the retailer's gross receipts. 
The tax 
must be paid by the retailer to the StateT; and 
(3) 
The provision of a taxable service defined under 
subsection 17-A to the extent the taxable service is 
provided in this State and only if the relationship 
between the provider and the recipient of the taxable 
service is not an employment relationship with respect 
to the provision of the service. 
Sec. D-4. 36 MRSA §1752, sub-§14, ,A, as enacted by PL 1987, 
c. 497, §24, is amended to read: 
A. 
"Sale price" includes: 
(1) 
Services whi:eh ~ 
are a part of a retail sale; 
and 
(2) 
All receipts, cash, credits and property of any 
kind or nature and any 
amount for which credit is 
allowed by the seller to the purchaser, without any 
deduction on account of the cost of the property sold, 
the cost of the materials used, labor or service cost, 
interest paid, losses or any other expenses. 
When 
a 
taxable service is provided for 
a 
fee 
that is 
contingent 
on 
an 
ultimate 
award, 
settlement or 
similar 
financial result and the fee is a certain percentage of that 
ultimate award or settlement. the fee that is ultimately 
provided is deemed to include both the sale price and the 
applicable tax. 
Sec. D-5. 36 MRS A §1752, sub-§14,~, as amended by PL 1989, 
c. 871, §6, is further amended to read: 
B. 
"Sale price" does not include: 
(1) 
Discounts allowed and taken on sales; 
(2) 
Allowances in cash or by credit made 
upon the 
return of merchandise or with respect to fabrication 
services pursuant to warranty; 
(3) 
The price of property returned or fabrication 
services rejected by customers, when the full price is 
refunded either in cash or by credit; 
(4) 
The price received for labor or services used in 
installing or applying or repairing the property sold 
or fabricated, if separately charged or stated; 
(5) 
Any amount charged or collected, in lieu of a 
gratuity or tip, 
as 
a 
specifically stated service 
charge, when that amount is to be disbursed by a hotel, 
motel, restaurant or other eating establishment to its 
employees as wages; 
(6) 
The amount of any tax imposed by the United States 
on or with respect to retail sales, whether imposed 
upon 
the 
retailer 
or 
manufacturers', importers', 
tax; 
the 
consumer, 
except 
any 
alcohol or tobacco excise 
(7) 
The cost of transportation from the retailer's 
place of business or other point from which shipment is 
made directly to the purchaser, provided that those 
charges are separately stated and the transportation 
occurs by means of common carrier, contract carrier or 
the United States mail; 
(8 ) 
The 
fee 
imposed 
by 
Title 
10, 
section 
1169, 
subsection 11; 
(9) 
The fee imposed by section 4832, subsection 1; e~ 
(10) 
The lead-acid battery deposit imposed by Title 
38, section 1604, subsection 2-BT~ 
(11) 
With respect to any fee for a taxable service, 
any 
portion 
of 
that 
fee 
representing 
direct 
reimbursement charged to the recipient of the taxable 
service for commodities or services previously paid by 
the person providing the service, as long as any tax on 
those commodities or services, if any tax applies, has 
been previously paid. 
Sec. 0-6. 36 MRSA §1752, sub-§17-A, 1fJ, as enacted by PL 1999, 
c. 790, Pt. A, §46, is amended to read: 
J. 
Prepaid calling arrangements; aRa 
Sec. 0-7. 36 MRS A §1752, sub-§17-A, 1[K, as amended by PL 2001, 
c. 396, §22, is further amended to read: 
K. 
Rental of furniture, audio tapes and audio equipment 
pursuant to a rental-purchase agreement as defined in Title 
9-A, section 11-105TL 
read: 
Sec. 0-8. 36 MRSA §1752, sub-§17-A, '1fL to 0 
are enacted to 
L. 
Amusement and recreational services. 
For the 
purposes 
of this paragraph, 
"amusement and recreational services" 
includes all services provided in this State to the general 
public or through private clubs that involve exchanging a 
right of access to any amusement, recreationaL exhibitive, 
cultural or athletic activity for any user fee, price of 
admission, gate fee or eguivalent form of remuneration; 
M. 
Personal services. 
For the purposes of this paragraph, 
"personal services" means services provided in this State to 
the general public by a person of specialized skill, talent 
or experience. 
Personal services characteristically provide 
attendant care to the recipient of the service: or care, 
maintenance or repair services to the recipient's real or 
personal property. 
"Personal services" includes, without 
limitation, such services as: 
(1) 
Personal attendant services, including, but not 
limited to, barbering, beautician, manicure, tattooing, 
body 
piercing, 
massage, 
reflexology, 
tanning 
and 
exercise or fitness services: 
(2) 
Laundering and dry cleaning services: 
(3) 
Painting, 
papering 
and 
interior 
decoration 
services: 
(4) 
Jewelry, Camera, watch and gun cleaning and repair 
services: 
(5) 
Pet grooming and kennel services: 
(6) 
Musical instrument tuning and repair services; 
(7) 
Swimming pool installation, repair, cleaning and 
maintenance services; 
(8) 
Radio, television and sound system repair services; 
(9) 
Furniture, rug and upholstery cleaning and repair 
services; 
(10) 
Locksmith services; 
(11) 
Personal 
property 
and 
self-storage 
services, 
including 
storage 
and 
mooring 
services 
for 
noncommercial watercraft; 
(12) 
Services 
related 
to 
the 
washing, 
cleaning, 
polishing, lubrication, painting or detailing of motor 
vehicles; 
(13) 
Disinfection and pest extermination or control 
services; 
(14) 
Landscaping, lawn care, grounds maintenance and 
tree removal services; 
(16) 
Printing, 
imprinti~ ____ ~'cId.inY_Qr 
__ .h,t5;,-,,_ing 
tangible 
personal. property 
for 
persons _ . .w:hc 
"1.ll~n~L~;j 
tangible personal ,}roperty for that._s~,:\d~!;U 
(17) 
Any 
fabrication, 
printing _..QX~ ... pr9~w~tior:L_Q!o 
tangible 
personal 
property 
by 
special 
orde~uli.hen 
tangible personal property is not intended for.re§.91~; 
(18) 
Repair services for noncorrunercial watercr:..a1t..l 
(19) 
Dance instruction and dance studio services; 
(20) 
Dating, escort and personal introduction services; 
( 21) 
Flower or balloon delivery services and services 
similarly 
provided 
as 
a 
demonstration 
of 
personal 
appreciation: 
(22) 
Limousine services: 
(23) 
Taxidermy services: 
(24) 
Flight instruction services; and 
(25) 
Antique or art auctioning or dealership services. 
"Personal services" does not include construction services; 
N. 
Business services. 
For the purposes of this paragraph, 
"business services" means 
any services provided in this 
State 
to 
business 
consumers 
except 
those 
services 
that 
constitute 
an 
integral 
or 
inseparable 
component 
of 
any 
activity 
of 
the 
business 
consumer 
involving 
the 
manufacturing. 
fabrication, 
processing or manipUlation of 
tangible personal property such that the business service is 
targeted to the unique needs of the business consumer and is 
not transferable across 
a 
range of business activities. 
"Business 
seryices" 
includes, 
without 
limitation, 
such 
services as: 
(1) 
Motor vehicle parking, other than metered space, 
in a lot or garage having 30 or more spaces: 
(2) 
The 
service 
of 
leasing 
or 
renting 
tangible 
personal property: 
(3) 
Employment agency services of any kind, 
except 
when the services are provided to an employer whose 
place of business is located in another state; 
(4) 
Credit collection or credit reporting services; 
(5) 
Secretarial, ~nographic or editing services; 
(6) 
Building 
maintenance, 
janitorial 
or 
cleaning 
services, including window cleaning services; 
(7) 
Office moving and installation services; 
( 8 ) 
Document 
and 
record 
preservation 
and 
storage 
services; 
(9) 
Telephone answering services; 
(10) 
Private investigation, patrol, building alarm and 
security and armored car services; 
(11) 
Management consulting, 
advertising, 
information 
and public relations service~ 
(12) 
Tax preparation services; 
(13) 
Financial accounting, 
financial management 
and 
investment counseling services; 
(14) 
Office and business machine repair services; 
(15) 
Sign construction and installation services; 
(16) 
Food catering and institutional food preparation 
and delivery services; and 
(17) 
Photocopying 
and 
document 
preparation 
and 
delivery services. 
"Business seryices" does not include construction services; 
and 
O. 
Licensed professional services. 
For the purposes of 
this 
paragraph, 
"licensed 
professional 
services" 
means 
services provided in this State to the general public by 
persons 
holding 
a 
certificate, 
license, 
registration or 
other formal permission to perform, provide or practice the 
service 
in 
this 
State, 
and 
that 
certificate, 
license, 
registration 
or 
other 
formal 
permission 
is 
characteristically granted only when the practitioner has 
obtained 
advanced 
education 
or 
specialized 
training. 
"Professional services" includes, without limitation, such 
services as: 
(1) 
Lobbying services; 
(2) 
Architectural and design consulting services; 
(3) 
Legal services; 
(4) 
Surveying and professional engineering services, 
including 
geological 
and 
hydrogeological 
consulting 
services and consulting services related to the science 
of soil analysis and subsurface engineering; 
(5) 
Arbitration services; 
(6) 
Appraisal services; and 
(7) 
Accounting, 
financial 
investment 
and 
financial 
management services. 
"Licensed professional 
services" 
does 
not 
include 
those 
services provided by health care practitioners. 
Sec. D-9. 36 MRSA §1760, sub-§14 is repealed. 
Sec. D-IO. 36 MRSA §1760, sub-§24 is amended to read: 
24. 
Funeral services. Sales of ~ 
funeral services, not 
exceeding $2,500 in value, that are provided for the disposition 
or interment of a deceased human body. 
Sec. D-ll. 36 MRSA §1760, sub-§34, as repealed and replaced by 
PL 1981, c. 163, §4, is repealed. 
Sec. D-12. 36 MRSA §1760, sub-§86 is enacted to read: 
86. 
Certain legal services. 
Legal services provided on a 
pro bono basis, all legal services provided by court appointment 
and all legal services provided to a client without substantial 
assets of any kind whose household income from all sources is 
less than 
200~ of the federal poverty level during the period 6 
months prior to the initiation of the legal service or during the 
period 6 months subsequent to the initiation of the legal service 
as such a determination can be reasonably calculated, whichever 
analysis yields the lesser income. 
Sec. D-13. Annual review. 
The joint standing committee of the 
Legislature 
having 
jurisdiction 
over 
taxation 
matters 
shall 
Page ll-LR1697(1) 
annually monitor all additional sales tax revenues collected, as 
well as the total annual cost of reimbursing the municipalities 
of the State, as provided for in this Part. 
By January 1, 2005 
and every year thereafter, the committee shall report to the full 
Legislature on the 
amount collected and the full 
amount 
of 
reimbursement 
for 
the 
last fiscal 
year. 
Any 
such 
revenue 
collections in excess of the reimbursement obligation must be 
used to reduce the tax burden on citizens of the State and the 
joint 
standing 
committee 
having 
jurisdiction 
over 
taxation 
matters is authorized to report out legislation to accomplish the 
reduction in the tax burden. 
PART E 
Sec. E-l. 36 MRSA §1811, first " 
as amended by PL 2001, c. 
439, Pt. TTTT, §2 and affected by §3, is further amended to read: 
A tax is imposed on the value of all tangible personal 
property and taxable services sold at retail in this State. 
The 
rate of tax is 
7% 
on the value of liquor sold in licensed 
establishments as defined in Title 28-A, section 2, subsection 
15, in accordance with Title 28-A, chapter 43; 
1% 10% on the 
value of rental of living quarters in any hotel, rooming house or 
tourist or trailer camp; 10% on the value of rental for a period 
of less than one year of an automobile; 
7% on the value of 
prepared 
food; 
and 
5% 
on 
the value of all other tangible 
personal property and taxable services. 
Value is measured by the 
sale price, except as otherwise provided. 
PARTF 
Sec. F-l. 36 MRSA §6652, sub-§l, as amended by PL 2001, c. 
396, §45, is further amended to read: 
1. 
Generally. 
A person against 
whom 
taxes 
have 
been 
assessed pursuant to Part 2, except for chapters III and 112, 
with respect to eligible property and who has paid those taxes is 
entitled to 
reimbursement of those taxes 
from 
the State as 
provided in this chapter. 
The amount of reimbursement is limited 
to 70% of the amount by which the taxes paid with respect to the 
eligible property exceeds the amount that has been or will be 
returned to the taxpayer by a municipality due to the taxpayer's 
participation in a municipal development district under Title 
30-A, chapter 206. 
For purposes of this chapter, a tax applied 
as a credit against a tax assessed pursuant to chapter III or 112 
is a tax assessed pursuant to chapter 111 or 112. 
Eligible 
property is subject to reimbursement pursuant to this chapter for 
up to 12 property tax years, but the 12 years must be reduced by 
one year for each year during which a taxpayer included the same 
property in its investment credit base under section 5219-D, 
5219-E or 5219-M and claimed the credit provided in one or more 
of those sections on its income tax return, and reimbursement may 
not be made for taxes assessed in a year in which one or more of 
those credits is taken. 
PARTG 
Sec. G-l. 36 MRSA §6651, sub-§2-A is enacted to read: 
2-A. 
lfonqualified service. 
"Nonqualified service" means 
any service engaged in in this State for 
another person or 
persons for a fee, retainer, commission or other consideration, 
exclusive 
of 
activities 
engaged 
in 
for 
an 
employer 
by 
an 
employee, 
including 
but 
not 
limited 
to 
business 
services, 
professional 
services, 
personal 
services 
and 
recreational 
services. 
"Nonqualified service" does not include any qualified 
service and does not include any of the following services, or 
MY-
activity by a person engaged in any of the following services 
that 
is 
conducted 
predominantly 
in 
support 
of 
either 
the 
following services or business activity related to those services: 
A. 
Production as defined in section 1752, subsection 9-B: 
B. 
Fabrication 
services 
as 
defined 
in 
section 
1752, 
subsection 2-C; 
C. 
Wood harvesting operations and the severance of sand, 
gravel, oil, gas or other natural resources produced or 
severed from the soil or water: or 
D. 
Commercial 
agricultural 
production, 
commercial 
aquacultural production and commercial fishing as defined in 
section 2013, subsection 1. 
Activities 
conducted by 
a 
person in support of 
any of 
the 
services listed in paragraphs A to D or any qualified service 
engaged 
in 
by 
that 
person 
include, 
without 
limitation, 
management, 
administration, 
marketing, 
purchasing, 
design, 
engineering, 
repair, 
maintenance, 
operation 
of 
support 
and 
auxiliary equipment, distribution, accounting, finance, billing, 
payroll, 
workers' 
compensation, 
accounts 
payable, 
accounts 
receivable, medical services, risk management, labor relations, 
training, 
human resources, legal services, packaging, 
storage, 
research 
and 
development, 
quality control 
and 
environmental, 
security, safety and fire protection. 
Sec. G-2. 36 MRSA §6651, sub-§§4 and 5 are enacted to read: 
4. 
Qualified service. 
"Qualified service" means any of the 
following when provided by one person to another for 
a fee, 
retainer, 
commission 
or 
other 
consideration: 
construction 
services; printing; retail or wholesale services exclusive· of 
those 
performed 
at 
or 
in 
support 
of 
retail 
facilities; 
modification of real or tangible personal property; development 
of computer software; leasing by a lessor of property that would 
be eligible for reimbursement under this chapter had the property 
been 
owned 
by 
the 
lessee 
rather 
than the 
lessor; 
services 
provided by a financial institution as defined in section 5206-D, 
subsection 8; services provided by credit unions authorized to do 
business in this State pursuant to Title 9-B, 
section 131, 
subsection 12-A; services provided by insurance companies subject 
to taxation under chapter 357; Internet access services; computer 
system 
services, 
including 
but 
not 
limited 
to 
maintenance, 
support, 
development, 
management, 
operation, 
communication, 
training, 
help 
desk, 
data 
processing, 
research, 
analysis, 
troubleshooting and similar services involving computer systems: 
repair, 
maintenance, 
refitting, 
refurbishing 
or 
upgrading 
commercial or military watercraft and all machinery, equipment 
and other property attached to or located on such watercraft and 
related 
to 
the 
use 
of 
such 
watercraft: 
and 
transportation 
services. 
"Qualified service" also includes any activity by a 
person 
engaged 
in 
a 
qualified 
service 
that 
is 
conducted 
predominantly in support of either the qualified service engaged 
in by that person or the business activity of that person related 
to that qualified service. 
5. 
Retail sales facility. 
"Retail sales facility" means a 
physical structure or portion thereof located in the State and 
predominantly utilized as a facility to serve customers who are 
physically present at the facility for the purpose of selecting 
and purchasing goods or a nonqualified service at retail. 
Sec. G-3. 36 MRSA §6652, sub-§ I-B, as amended by PL 2001, c . 
396, §46, is further amended·to read: 
1-B. Certain property excluded. 
Notwithstanding any other 
provlslon of law, reimbursement pursuant to this chapter may not 
be made with respect to the following property: 
A. 
Office furniture, including without limitation tables, 
chairs, desks, bookcases, filing cabinets and modular office 
partitions; aBe 
B. 
Lamps and lighting fixturesTL 
C. 
Property 
predominantly 
employed 
by 
the 
person 
in 
possession of that property either in the provision of a 
nonqualified service or in support of the provision of a 
nonqualified 
service 
being 
provided 
by 
that 
person, 
exclusive of property used by 
a 
person in providing 
a 
nonqualified service to 
an affiliate when that property 
would be eligible for reimbursement if it were owned by that 
affiliate; and 
D. 
Property employed by the person in possession of that 
property either in a 
retail sales facility or 
employed 
predominantly in the support of such a facility. 
Property 
employed in support of a retail sales facility does not 
include property employed 
predominantly in 
one 
or 
more 
qualified services or in one or more of the services listed 
in section 6651, subsection 6, paragraphs A to D by any 
p~rson, or in any activity in support of or the business 
activity of that person related to such qualified services 
or listed services. 
~ais-6aa6eetieB-applies Paragraphs A and B apply to property tax 
years beginning after April 1, 1996. 
Property affected by tais 
sasseetieB ~raphs A and B that was eligible for reimbursement 
pursuant to chapter 915 of property taxes paid for the 1996 
property tax year is grandfathered into the program and continues 
to be eligible for reimbursements for 
up to 12 property tax 
years, unless it subsequently becomes ineligible. 
Paragraphs C 
and D apply to property tax years beginning after April 1, 2003. 
Property affected by paragraphs C and D that was eligible for 
reimbursement under this chapter for property taxes paid for the 
2003 property tax year is grandfathered into the program and 
continues 
to 
be 
eligible 
for 
reimbursement 
to 
the 
extent 
permitted by this chapter as that property existed on April 1, 
2003, unless it subsequently becomes ineligible. 
Property used 
in the provision of a nonqualified service or in support of the 
prov~s~on of a 
nonqualified service, 
and property used in a 
retail sales facility or in support of a retail sales facility, 
includes, 
without 
limitation, 
property 
used 
in 
management, 
marketing, purchasing, distribution, accounting and research and 
development. 
SUMMARY 
Part A affects the Maine Residents Property Tax Program, the 
so-called "circuit breaker program," by: 
1. 
Reducing the tax-to-income threshold initially to 
3°-0, 
phasing in an additional decrease of .5% over a 4-year period; 
Page l5-LR1697(l} 
2. 
Increasing the maximum rebate to $6,000; 
3. 
Increasing 
the 
income 
limits 
for 
single-member 
households and households with 2 or more members to $45,000 and 
$75,000, respectively; 
4. 
Increasing the renter rebate to 25%; and 
5. 
Allowing persons to use the income tax form to file for 
a refundable credit. 
Part B increases from 5.1% to 8.5% the percentage of sales 
and income tax revenues transferred to the Local Government Fund 
for revenue sharing. 
Part C reforms the income tax by increasing the personal 
exemption amount to equal the federal amount, 
increasing the 
earned income credit and making it refundable and creating a 10% 
income tax bracket for income of $100,000 or more for single 
filers, $150,000 or more for persons filing as heads of household 
and $200,000 for persons filing married joint returns. 
Part D does the following: 
1. 
It expands the definition of "taxable services" for 
purposes of the imposition of sales tax to include amusement and 
recreational, 
business, 
personal 
and 
professional 
services. 
Under this bill, the provision of those services is subject to 
the 
5% 
sales tax. 
The 
term "construction services" is also 
defined for the purpose of distinguishing nontaxable construction 
services from taxable personal or business services; 
2. 
It eliminates the sales tax exemption for sales of 
short-term publications. 
It also limits the exemption on funeral 
services 
and 
repeals 
the 
exemption 
on 
coin-operated vending 
machine sales. 
I t also amends the law by creating an exemption 
for certain legal services provided to low-income clients; and 
3. 
It 
requires 
the 
joint 
standing 
committee 
of 
the 
Legislature having jurisdiction over taxation matters to annually 
review 
the 
additional 
sales 
tax 
revenue 
collected, 
as well as 
the annual cost of reimbursing municipalities as 
required. 
Any 
such 
revenue 
collected 
in 
excess 
of 
the 
reimbursement obligation must be used to reduce the tax burden on 
Maine citizens. 
Part E increases the sales tax on lodging from 7% to 10%. 
Page l6-LR1697(1) 
" 
Part F 
reforms 
the business equipment tax 
reimbursement 
program 
(BETR) 
by limiting state reimbursement to 70% of the 
taxes paid on eligible property reduced by the amount of tax 
reimbursement received for the property through a tax increment 
financing agreement. 
Part G provides that, for property first placed in service 
in property tax years beginning after April 1, 
2003, property 
used in, 
or in support of, 
the provision of 
a 
nonqualified 
service or a 
retail sales facility is not eligible for 
BETR 
reimbursement.