January 2, 2013

Tax break wanted for plane buys, fixes in Maine

By Steve Mistler smistler@pressherald.com
Staff Writer

The LePage administration will seek a permanent sales tax exemption for people who buy airplanes or have them repaired in Maine.

George Gervais, commissioner of the Department of Economic and Community Development, confirmed Wednesday that the administration has submitted a bill that eliminates sales taxes on planes and aircraft parts. A similar provision is already in effect but is scheduled to lapse in 2015. It was included in the two-year state budget adopted in 2011.

Gervais said the current measure has been a boost to the state's aviation industry. It originally was introduced by former Senate President Kevin Raye, R-Perry, who this year campaigned on its success during his unsuccessful bid to unseat U.S. Rep. Mike Michaud, D-2nd District.

The provision, which eliminated the 5 percent tax on sales and repair of and replacement parts for aircraft, took effect July 1, 2011.

The tax exemptions will cost the state about $608,000 a year in taxes, according to the Legislature's nonpartisan Office of Fiscal and Program Review.

The agency estimated that current provision would cost $2.5 million through its expiration in 2015.

Gervais acknowledged that the administration would have to justify the price tag amid what promises to be contentious budget negotiations. The governor is expected to present the state's next two-year budget on Jan. 11. He will do so amid forecasts that the state will face an estimated $880 million revenue gap over the next two years.

In 2011, the Associated Press reported that Portland-based Maine Aviation Corp. planned to build new hangars and expand its workforce as a result of the tax elimination. The company said it expected to grow its workforce from 60 to 100 employees.

"There are certainly businesses throughout the state that have benefitted from this," said Gervais, adding that the sales tax had impeded aviation growth before the exemption.

According to the Aircraft Owners and Pilots Association, an aviation trade publication, no other state in New England taxes aircraft parts, while only Vermont taxes the sales of aircraft.

Prior to the 2011 budget bill, Maine Revenue Services also collected a 5 percent use tax from people who bought aircraft in other states but brought their planes to Maine for more than 20 days.

That Maine previously assessed such taxes had drawn criticism from aircraft owners and repair companies, prompting Raye to submit the bill in 2011.

The Legislature eventually spiked Raye's bill, but its content was included later in the state's two-year budget.

The exact wording of the legislation by the LePage administration is not yet public. However, the bill is expected to be referred to the Taxation Committee after the Legislature convenes Jan. 8.

Steve Mistler -- 791-6345

smistler@pressherald.com

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