August 29, 2013

Maine's sales-tax burden is fairly low

An analysis of combined statewide and local sales charges finds the state's 5% rate is third-lowest.

By Jessica Hall
Staff Writer

Maine has the third-lowest sales tax rate in the country of the 47 states that have either state or local sales taxes, according to a study released by the Tax Foundation that examined state and local sales taxes.

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In this November 2011 file photo, shoppers crowd the Maine Mall in South Portland. Maine has the third-lowest sales tax rate in the country, according to a study released by the Tax Foundation that examined state and local sales taxes.

John Patriquin / Staff Photographer

The five states with the lowest averaged rate of combined state and local sales taxes are Alaska (1.69 percent), Hawaii (4.35 percent), Maine (5 percent), Wisconsin (5.43 percent) and Wyoming (5.50 percent).

Five states do not have a statewide sales tax at all: Alaska, Delaware, Montana, New Hampshire and Oregon. Of these, Alaska and Montana allow cities and towns to charge local sales taxes. Maine does not.

Starting in October, however, Maine's state sales tax will increase from 5 percent to 5.5 percent for two years, which is expected to generate an additional $133.8 million in revenue. The state charges differing tax rates for certain goods and services, such as a 7 percent meals and lodging tax that is set to rise to 8 percent, and an auto rental tax rate of 10 percent, according to Maine Revenue Services.

The sales tax increase is unlikely to have much of a chilling effect on consumer buying behavior, said Charles Colgan, professor of public policy and management at the University of Southern Maine's Muskie School of Public Service.

"For the most part, there's very little effect at this level -- a half-cent increase is not likely to be discernible," Colgan said.

The study by the Tax Foundation, based in Washington, D.C., looked at statewide sales tax rates and the average local sales tax rates in each state.

Maine had a state sales tax of 6 percent in the 1990s. That increase initially created a short-term hiccup in consumer shopping habits, as people hurried to purchase big-ticket items such as appliances before the rate increased, but that lasted only a few months until normal shopping patterns returned, Colgan said.

Maine's sales tax rate plays more of a role for retailers along the border with New Hampshire, which assesses no sales tax. Colgan said that high-priced items such as appliances and televisions may be attractive to buy in New Hampshire rather than some Maine border towns, but high gas prices may offset much of the savings in routine purchases.

According to the Tax Foundation, the five states with the highest average combined sales tax rates are Tennessee (9.44 percent), Arkansas (9.18 percent), Louisiana (8.89 percent), Washington (8.87 percent) and Oklahoma (8.72 percent).

The Tax Foundation monitors fiscal policy at the federal, state and local levels. The organization is nonprofit but has received funding from conservative groups.

Jessica Hall can be contacted at 791-6316 or at:


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