AUGUSTA, Maine — Gov. Paul LePage vetoed his sixth bill of the legislative session Friday afternoon.
LD 319 directed Maine Revenue Services to review Maine’s conformity with the Streamlined Sales and Use Tax Agreement, which is an agreement among several states and retailers, and to report back to the Legislature’s Taxation Committee by January 2014.
The Democratic sponsor of the bill said LePage’s veto, if upheld, would be a mistake that could end up costing Maine retailers.
Use taxes are sales taxes that are due when consumers from one state purchase goods from retailers in another. The issue has grown in importance with the rise of online retailers. Mike Allen, the state’s associate commissioner for tax policy, estimated that Maine is losing up to $25 million a year in use taxes that are not being collected.
LD 319 was enacted by unanimous vote on May 7.
LePage wrote in his veto letter to lawmakers that joining the federal agreement would add bureaucracy in an area where Maine should be free to make its own decisions — or at least benefit from a federal solution that benefits all states.
“The agreement is useful as a guide, but Maine can make the right decisions by itself,” wrote LePage. “The underlying problem — unequal taxation between various sales channels — is best addressed at the federal level and I would encourage the Legislature to reach out to Congress with your concerns.”
LePage said the study would tie up valuable resources within state government for what he called an “open-ended policy matter.”
“If the Legislature wants to pursue this study, it should look to its own office of fiscal review or provide my agencies with additional funding for the efforts,” wrote LePage. “Otherwise, it is merely an unfunded mandate on the executive branch.”
The Legislature’s fiscal office estimated that the cost of the study could be absorbed within existing budgeted resources.
But House Majority Leader Seth Berry, D-Bowdoinham, who sponsored the bill, said the study would be much more of a burden on the Legislature’s Office of Fiscal and Program Review than it would be for Maine Revenue Services. The study is a crucial step in “streamlining” Maine’s use tax code in advance of federal law forcing the issue, said Berry.
“The reality is, the fiscal note is based on what Maine Revenue Services said it would take them to do the study,” said Berry. “They have been tracking this issue. They can do it without a lot of additional work.”
Allen said Friday afternoon that he and LePage favor a federal solution to the problem, rather than joining a multi-state consortium. He said a federal law would be more stable than the multi-state agreement and that a clause in the state Constitution that bars the Legislature from surrendering its power of taxation could be problematic if other states redefine the agreement.
“If that group of states changes those definitions, it requires Maine to change ours,” said Allen. “You would almost have to have an annual bill go through the Legislature. It puts the Legislature in a difficult position because if the state doesn’t agree, we could be kicked out of the consortium.”
Allen estimated that the state could collect between $1 million and $3 million under the multi-state coalition and up to $25 million under a new federal law.
The Legislature has been considering several “e-fairness” bills this session, all of which would become moot if Congress and President Barack Obama enact the Marketplace Fairness Act of 2013. The measure, which is co-sponsored by U.S. Rep. Chellie Pingree, D-Maine, and U.S. Sen. Susan Collins, R-Maine, was proposed last year but failed to make it to a vote. It is still under debate.
LePage encouraged the state’s congressional delegation to pursue the federal solution in a March 12, 2012, letter to Collins and then-Sen. Olympia Snowe, R-Maine.
“From my experience in the retail world, I can assure you that Maine retailers love competition,” wrote LePage. “They know competition sharpens their services and products, and keeps customers coming back. But the rules need to be fair and applied equally.”
Curtis Picard, executive director of the Retail Association of Maine, said his organization supports the study proposed in LD 319.
“To us it’s a simple update of an issue that we think should be studied,” said Picard. “It’s worthwhile studying and we hope people look favorably on that.”
Berry said he didn’t understand why the governor vetoed a bill that is “such a huge step toward supporting businesses.”
“They governor claims that he’s for e-fairness, but with this action he’s really shooting the horse out from under his own saddle,” said Berry Friday evening. “This is exactly what we need to do if we’re going to get on board with a federal measure.”
It takes a two-thirds vote of both chambers of the Legislature to override a gubernatorial veto.