On December 22, 2025, Maine Revenue Services revised the Business Guide to Sales and Use Tax and its Instructional Bulletin Number 36. Businesses that sell goods or services to government agencies and nonprofit organizations should pay close attention to the revisions that took effect January 1, 2026. While many of the sales to government agencies and nonprofit organizations remain tax-exempt, compliance risk increases due to the expansion of the sales tax base to services previously subject to the Service Provider Tax (SPT).
The biggest change is that Maine eliminated the Service Provider Tax on January 1, 2026, and began taxing many services under the regular sales tax rules. Newly taxable services include telecommunication services, digital audio and video services, fabrication services and certain installation, maintenance, and repair services. Because of this change, sellers should not assume that services provided to government agencies and nonprofit organizations are tax exempt. Exemption certificates and tax settings should be reviewed to confirm they apply to these newly taxable services. Maine notes that “Sales to organizations that do not hold and provide to the vendor an exemption certificate issued by MRS are taxable”.
The guide also reminds sellers that construction transactions remain a high-risk area. While materials that become part of a building owned by an exempt organization may qualify for exemption, contractors are often treated as the final user of those materials. If the paperwork does not clearly show the exempt organization as the purchaser, sales tax may still apply. Maine states that “Any purchases made by the contractor that are not to be incorporated into the real estate owned by the Maine tax-exempt organization are taxable.” Lastly, Maine Revenue Services emphasizes that all sales treated as exempt must be properly reported and supported with documentation kept for at least six years from when the records were generated including after when the SPT was repealed. Although the exemption rules themselves are familiar, the expansion of taxable services increases the risk of errors.
Businesses that sell to government agencies and nonprofit organizations should review their exemption documents, contracts, and billing practices to avoid any issues. As Maine expands sales tax to additional services in 2026, sellers should validate exemption certificates against newly taxable services and confirm that billing systems correctly reflect exempt and taxable transactions.
(Business Guide to Sales and Use Tax, Instructional Bulletin No. 36, Maine Revenue Services, revised December 22, 2025.)