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 end in 2015. It was included in the state’s two-year budget adopted in 2011.
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Gervais said the current measure has been a boost to the state’s aviation industry. It was originally 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-Maine.
The provision, which eliminated the 5 percent tax on repairs and replacement parts for aircraft, went into 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 the current provision would cost $2.5 million through its expiration in 2015.
Gervais acknowledged that the administration would have to justify the cost amid what promises to be contentious budget negotiations. The governor is expected to present the state’s next two-year budget 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 work force as a result of the tax elimination. The company said it expected to grow its work force from 60 to 100 employees.
“There are certainly businesses throughout the state that have benefited from this,” said Gervais, adding that before the exemption the sales taxes impeded aviation growth.
According to the Aircraft Owners and Pilots Association, a trade publication, no other state in New England taxes aircraft parts, and only Vermont taxes the sales of aircraft.
Before the 2011 budget bill, Maine Revenue Services also collected a 5 percent use tax from people who purchased aircraft in other states but brought their planes to Maine for more than 20 days.
That Maine had assessed such taxes had drawn criticism from aircraft owners and repair companies, prompting Raye to submit the bill.
Raye’s bill was eventually spiked by the Legislature but later included in the state’s two-year budget.
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