Effective January 1, 2025, Maine has updated the definitions in their sales tax code to allow businesses who purchase property that will be rented to customers to use an exemption certificate. They will also be able to collect tax on the on-going lease payments they collect from their customers. Prior to this change, the state required lessors to pay sales tax on their purchases of property that they intended to rent upfront, but the new definitions allow lessors to be treated as retailers, and for each periodic payment made on the lease to be treated as a sale. Additionally, the state has added a section clarifying the sourcing rules for lease payments, which are taxed at the “primary property location” of the rental property as available in the lessor’s records.
For businesses that purchased property prior to this law coming to effect, have paid tax on the property, and will now be required to collect tax on their customer’s lease payments, the state has defined a period during which they can apply for a refund equal to the amount of tax they have collected from customers. The refund request can be up to a maximum of the total tax they paid on the property. This refund is available for qualifying leases of property originally purchased between January 1, 2023 and January 1, 2025, and leased to customers between January 1, 2024 and January 1, 2027. The refund must be submitted to the department between January 1, 2025 and March 31, 2027. (Maine. Legislative Document 2000, 131st Leg., 2d Reg. Sess. (2024) (signed into law Apr. 26, 2024))