Maine Amends Sales Tax Treatment of Some Lease and Rental Transactions

Maine has amended Title 36 of the Maine Revised Statutes pertaining to the sales tax treatment of lease and rental transactions in the state. Effective January 1, 2025, the amendments update various definitions, including allowing lessors to be treated as retailers and each periodic lease or rental payment to be treated as a sale. 

The changes allow buyers that purchase tangible personal property for subsequent lease or rental to customers to purchase the property exempt from sales tax via resale. Buyers can then collect sales tax on the ongoing lease or rental payments from customers.  

Previously, Maine required lessors to pay sales tax upfront on the purchase of property for subsequent lease or rental, and it exempted from sales tax payments collected from customers for use of the property in the state. 

The amendments also clarify the sourcing rules for lease payments. Leases and rentals of tangible personal property requiring periodic payments will now be sourced to the primary property location for all payments after the first month’s, which remains sourced in accordance with sourcing for retail sales. 

The primary property location is an address for the property provided by the lessee that is available to the lessor from the lessor’s records and maintained in the ordinary course of business when use of that address does not constitute bad faith. The primary property location is not altered by intermittent use of the rented property at different locations.

Lastly, the amendments provide guidance on claiming refunds for businesses that purchased property and paid sales tax upfront but will have monthly lease or rental payments subject to sales tax once the new rules go into effect. They specify that the state tax assessor shall refund the tax imposed and paid by a qualified lessor on the purchase of qualifying lease or rental property on or after January 1, 2023, and before January 1, 2025. The amount of the refund is limited to the Maine sales or use tax on qualifying lease or rental property collected and remitted to the state by the qualified lessor on or after January 1, 2025, and before January 1, 2027.

A qualified lessor may request a refund by submitting a claim for refund on a form prescribed by the assessor. The lessor must file the claim on or after January 1, 2027, and before March 31, 2027. The state may audit any claim for refund.

A qualified lessor is a person who paid Maine sales or use tax on the purchase of qualifying lease or rental property on or after January 1, 2023, and before January 1, 2025, and collected and remitted the tax on the lease or rental of qualifying property on or after January 1, 2025.

The term “qualifying lease or rental property" means tangible personal property upon whose purchase a qualified lessor paid Maine sales or use tax on or after January 1, 2023, and before January 1, 2025. The property also must have been part of a taxable lease or rental transaction on or after January 1, 2025, for which the qualified lessor collected and remitted Maine sales or use tax.