(The Center Square) – With a 5.5% retail sales tax rate, Maine placed near the bottom of a recent analysis that pitted states against one another and gauged where consumers pay the most in sales tax at the checkout line.
The 2023 analysis, from the Tax Foundation public policy organization, delved into each state’s specific structure for assessing retail sales taxes.
All but five states use sales taxes as a revenue generator, with nearby New Hampshire, which has no sales tax, being among the outliers.
Maine is an outlier in its own right as well.
According to the Tax Foundation analysis, 38 states across the country allow local taxing authorities to impose a retail sales tax of their own on top of the state one. Maine is among the states without such a provision in place for counties and municipalities.
Jared Walczak, Tax Foundation’s vice president of state projects, said taxing retail sales receipts is a key line item on the revenue side of the ledger for several states.
Speaking to nationwide averages, Walczak wrote, “Retail sales taxes are an essential part of most states’ revenue toolkits, responsible for 32% of state tax collections and 13% of local tax collections.”
In his analysis, Walczak cautioned state policymakers to hold the line on taxing retail purchases – particularly for smaller states, where residents can cross borders to take advantage of lower-cost items.
“Avoidance of sales tax is most likely to occur in areas where this is a significant difference between jurisdictions’ rates,” Walczak said. “Research indicates that consumers can and do leave high-tax areas to make major purchases in low-tax areas.”
Sans New Hampshire, Maine has the lowest sales tax rate within New England.
The Tax Foundation ranked Rhode Island 25th with its 7% rate, Vermont 32nd with its average rate of 6.359%, and Massachusetts at 35th with its 6.25% rate.
There was an effort this legislative session to lower Maine’s tax rate back to 5%, which was the figure up until a decade ago, through a series of reductions.
However, Legislative Document 1747 was ultimately defeated.
A fiscal note from the Maine Department of Administrative and Financial Services estimated the state would lose $44.95 million in general fund revenues in the 2023-24 budget, with a 5.25% rate in place.
Once a 5% rate was solidified, the agency projected a reduced income of $136.67 million in the 2024-25 budget.
