AUGUSTA – Mainers who rent their camps or homes for a few weeks in summer will be asked to collect the state’s 7 percent meals and lodging tax under a provision in the proposed two-year state budget.
The state is already collecting the tax when a person owns two or more camps or cottages and rents them for part of the year. They are considered to be a “business” even though a part-time business.
“It just seems that we are really going after the little guys a lot on this,” said Sen. Jonathan Courtney, R-Sanford. He serves on the Legislature’s Taxation Committee, where a slim majority of the panel opposed the provision. “It just doesn’t seem the way to go.”
Sen. Richard Nass, R-Acton, also expressed opposition to the provision. Nass serves on the Appropriations Committee but had served on the Taxation Committee last session.
“A majority of the tax committee is opposed to this,” he said, “and I don’t think it is a good idea either.”
But State Tax Assessor Jerome Gerard told the Appropriations Committee that casual rentals are not as casual as they used to be. He cited a magazine article about Mainers who rent their coastal homes for up to $7,000 a week in summer.
“This is a booming business, and it is only fair to be taxing these causal rentals because they are not so casual anymore,” he said.
Mike Allen, an economist with Maine Revenue Services, said the state is losing out on a significant amount of revenue by not collecting the tax. He said the budget estimates $2.6 million in the first year and $4.4 million in the second year, with a significant increase as Mainers are educated on their responsibility to collect the tax.
“I think it could be somewhere around $10 million, maybe $11 million a year,” he said.
Rep. Robert Nutting, R-Oakland, a member of the Appropriations Committee, said he represents an area with a lot of camp owners who often rent their camps for part of the summer.
“They rent those camps for part of the summer to help pay their taxes, and they are paying both federal and state income taxes on that money they get,” Nutting said. “Here we are saying to them that we want them to collect a business tax for us on top of that. Where does it stop?”
Sen. John Martin, D-Eagle Lake, a member of the Appropriations Committee, said the issue involves not only summer rentals. He said camp owners in his area make more from renting camps in the winter, for the use of snowmobilers, than they do from summer rentals.
“In my area, people use real estate agents to handle the rentals,” he said, “and they are collecting the sales tax for the camp owners already.”
But Courtney said it is far different to ask a homeowner or camp owner to start collecting the tax from their individual summer rentals. He predicted lawmakers will hear from their constituents, once they understand what they are being asked to do for the state.
“If you think you got a lot of phone calls on the resale certificates, wait until you get the phones calls on this,” he said.
Despite that warning, the Appropriations Committee tentatively voted 8-5 to include the change in the budget. Democrats supported Democratic Gov. John Baldacci, Republicans opposed the change.
Sen. Peggy Rotundo, D-Lewiston, co-chairman of the Appropriations Committee, said all the issues that have divided votes may be reconsidered before the final budget vote is taken.
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