AUGUSTA, Maine — The Legislature’s Taxation Committee voted unanimously Monday against a bill that would have freed Mainers from the legal responsibility to pay sales tax or its equivalent on small purchases from Internet-based retailers, but that doesn’t mean the issue is dead this legislative session.
Freshman state Rep. Corey Wilson, R-Augusta, submitted LD 119, “An Act to Exempt from the Use Tax $1,000 of Internet Purchases from Out-of-state Sellers,” at the request of a constituent. Current state law requires anyone who buys goods online to report those purchases and pay the equivalent of Maine’s 5 percent sales tax, known as a use tax. But that doesn’t happen all the time.
“When an individual unknowingly fails to admit the purchase and doesn’t pay the use tax, suddenly the individual is guilty of a crime,” said Wilson.
Geoff Herman of the Maine Municipal Association and Curtis Picard, executive director of the Retail Association of Maine, were the only people who testified during a public hearing on the bill Monday afternoon at the State House. Both spoke against Wilson’s bill on the grounds that it would create unfairness between Internet retailers and those who have stores physically located in Maine.
“Maine’s municipal leaders believe the retail playing field between Main Street retailers and the Internet retailers has needed to be made level for a long time,” said Herman. “LD 119 goes in the diametrically wrong direction in that regard.”
One problem, according to Herman, is a 1992 decision by the U.S. Supreme Court that requires a “physical presence” by a retailer in a state in order for that state to require the retailer to collect sales taxes.
“Twenty years later, the Internet is physically present everywhere,” said Herman. “As a result, the physical presence requirement is both nonsensical and harmful to retailers physically located in municipal downtowns as they try to compete against giant Internet competitors.”
“This bill doesn’t do what the retail industry is looking for,” he said. After the meeting, Picard said he expects the Legislature this session to consider numerous bills related to Internet sales and the use tax. He said from his perspective, the best thing that could happen is for the state to require Internet retailers to collect sales taxes and distribute them into Maine’s tax coffers.