A new rule that requires vendors to change the way they pay sales, use and service provider taxes has drawn opposition from a lawmaker who says the rule is unfair to small businesses.
Sen. Richard Rosen, R-Bucksport, says he has submitted legislation to block a new rule that Maine Revenue Services plans to enact April 1. It requires businesses to file their monthly sales, use and service tax receipts electronically, moving away from the system of sending forms and checks through the mail. This rule is part of a phased process that by 2012 will require all payments of income, sales, use and service provider taxes to be done electronically.
Peter Beaulieu, director of the sales, fuel and special tax division of Maine Revenue Services, said the changes are designed to save the state money by moving to a “paperless” system and in the long run will be easier for taxpayers. Rosen countered that the requirement will create hardships on businesses that should have been investigated before the rule was enacted.
“I’ve heard from many small business people who are extremely upset,” said Rosen. “They’re just not comfortable with this proposal. They feel they should not be required to make this conversion.”
Part of Rosen’s objection is that the rule complicates a task that is already the result of an unfunded state mandate.
“Anyone who collects sales taxes in Maine is already an unpaid tax collector,” he said. “Maine does not reimburse for that. Requiring that they make an investment for electronic filing is too much to ask. Small businesses that collect by paper and submit by the month ought to be able to continue to do it that way.”
Maine businesses file tax receipts on a variety of schedules depending on how much tax revenue they collect. Beaulieu estimated that there are about 8000 accounts that file on a monthly basis and therefore face the April 1 deadline for compliance. Of the 305,000 tax returns filed in Maine in 2008, about 41 percent were done electronically.
“We’re looking to take that to 100 percent by 2012,” he said. Maine Revenue Services has been notifying businesses about the change with monthly notifications for the past two or three months, an effort that will intensify as April 1 approaches.
The mandate, included in Maine Revenue Services Rule 104, stipulates a $50 penalty for each improperly filed return, which can be done either over the Internet or by telephone.
“We realize that not everyone would have computer or Internet access,” said Beaulieu. “We’re receiving comments from people that they just don’t like to do any electronic banking as well. In those cases, we will still accept checks. We will work with people who feel that they need to make other arrangements.”
Rule 104 also requires income tax preparers to file returns electronically, except under certain circumstances or when the taxpayer refuses to allow electronic filing. This rule is being phased in and will apply to all Maine income taxpayers by 2010.
Beaulieu estimates that the move to electronic filing will save the state about $2.5 million per year, the majority of it on the income tax side.
Rep. Stacey Allen Fitts, R-Pittsfield, said he supports Rosen’s bill.
“We don’t have broadband (high-speed internet) services everywhere,” said Fitts. “To create a mandate that requires people to file monthly electronic reports is putting the cart before the horse. It’s a bit over-the-top.”
Jim McGregor, director of government affairs for the Maine Merchants Association, said the rule may or may not be beneficial, but should have gone through the Legislature as a major substantive rule instead of being enacted by Maine Revenue Services alone. Going through the legislative process means the rule can be scrutinized by legislators and affected businesses during a public hearing process.
“This fits into the category of an agency rule that should have final approval by the Legislature,” he said. “I’m not saying it’s a bad thing, but it merits legislative review.”
Fitts and Rosen agreed.
“Our job as legislators is to make sure that when agencies step out of bounds, we put a bill in,” said Fitts. “I hope that when people are made aware in the halls of the State House, the revenue service will hold back.”
Rosen, whose bill hadn’t been printed as of Monday, said he has requested that it be taken up on an emergency basis and enacted in time to block the rule’s implementation.
(State House News Service)
