PORTLAND (AP) – A Maine law that assesses taxes on out-of-state plane owners who fly their aircraft into the state is coming under pressure in the courts and in the Legislature.

Two out-of-staters have filed lawsuits in Kennebec County Superior Court challenging tax bills on their planes. Even though they bought their planes elsewhere, they were billed because they flew their planes into Maine for more than 20 days during their first year of ownership.

In Augusta, a bill introduced by Senate President Beth Edmonds, D-Freeport, would exempt nonresidents from sales taxes on future aircraft purchases, even if they fly the planes in Maine.

The lawsuits and the legislative proposal come after a number of airplane owners complained of bills ranging from $16,000 to $176,000 that Maine Revenue Services sent them demanding tax payments on their planes.

At issue is Maine’s “use tax,” which allows the state to collect taxes on many items that are bought out-of-state – and therefore aren’t subject to Maine’s sales tax – but are used in Maine.

In the case of airplanes, tax officials say they can collect a 5 percent use tax from people who didn’t pay sales taxes on their planes if they brought them to Maine over the three-week threshold in the first year of ownership, excluding time for repairs, alterations or maintenance.

In one of the lawsuits, Steve Kahn of Massachusetts claims the precise wording of Maine’s tax law makes him exempt from the tax. The lawsuit also claims that Maine Revenue Services’ interpretation of the law violates the commerce clause of the U.S. Constitution.

Kahn, who bought his plane in 2002 but didn’t get billed until 2007, regularly flies his plane to a vacation home near Camden.

Tax officials say they are enforcing Maine’s tax laws sending out the bills. But Kahn and other plane owners say there is something wrong when they get bills years after buying their planes for taxes they didn’t know existed.

“There are a lot of people upset with the way Maine handles taxes, and this is putting the spotlight on it again,” said Kahn.

Kahn appealed his bill for $25,318 in taxes and interest, which Maine Revenue Services denied in late December. He filed his lawsuit the following month.

Kahn’s attorney, Jon Block of Pierce Atwood in Portland, said he has filed two lawsuits so far, with plans to file a third on Friday and a fourth in the coming weeks.

At the State House, legislators will soon debate Edmond’s bill that extends a sales tax exemption to aircraft bought by nonresidents, regardless of where the planes are used. The exemption would apply to future plane sales but would not be retroactive.

Edmonds said the tax on out-of-state plane owners is hurting the state. Many of them fly their planes to Maine on business, and the state should be encouraging them to come here, she said.

“In this case, I think the benefits outweigh the costs,” she said.

AP-ES-02-07-08 1604EST

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