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Clients with Rental Properties

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Please review the following information in reference to Short-Term and Long-Term Rental Properties.

This will breakdown and explain the different scenarios and types of rental activities.

Please be aware that different rules apply to different types of rental properties.

The State of Maine requires Sales Tax to be collected on short-term vacation rentals to parties who rent for less than 28 days.  They also require collection of sales tax for certain renters over 28 days. 

This is a complex issue, so please be sure to contact us with any questions.

1. TAXABLE RENTALS

The Maine Sales and Use Tax Law imposes a tax on “rental of living quarters in any

hotel, rooming house, tourist or trailer camp” including casual rentals. Every person who owns, manages or operates, in the regular course of business or on a casual basis, a hotel or who collects or receives rental payments on behalf of the owner, manager or operator, must register for and collect Maine sales tax on the rentals. A property does not have to be advertised or held out to the public at large in order for rentals of the property to be taxable.

2. EXEMPTIONS

A. Casual Rentals for fewer than 15 days. In most cases, a person who has only one rental unit, such as a room, a single camp or a condominium unit for rent and rents it for fewer than 15 days each calendar year is not considered a “retailer” and is not required to collect sales tax on those rentals. However, if the property has been placed in the hands of a real estate agent or other person engaged in the business of renting or managing rentals of living quarters, that agent must collect and report sales tax on the rental, regardless of the length of time the property is rented.

B. Occupancy for 28 days or more. Rental charged to any person who rents continuously for 28 days or more in the same hotel is exempt from sales tax if the living quarters are a person’s primary residence, or if the rental is in connection with education or employment. An affidavit of exemption for 28-days continuous rental should be completed by the tenant and by the hotel. The affidavit is attached to this bulletin and may be found on the Maine Revenue Services website. If tax has been paid by the person during the initial 28-day period, the tax should be refunded by the retailer (lessor). If the retailer (lessor) has reported and paid the tax to the State, the retailer should take a corresponding credit on the Sales and Use Tax Return filed for  the period in which the refund or credit occurred by adjusting the “Taxable Rentals” figure shown on the return.

(1) “Continuous residence” is determined by continuous rental of the quarters, rather than by actual occupancy of the quarters. Continuous residence is not interrupted merely by changing rooms within the same facility. Continuous residence is also not interrupted by the fact that the rental unit may be occupied at various times by different individuals, such as when an airline or construction company rents a room or block of rooms for employees who may come and go for work purposes, provided that the unit is rented and paid for by one person (i.e., the airline or construction company) for the qualifying 28 days.

(2) “Primary residence” means the residence maintained at the location in which the individual is domiciled. “Domicile” is the place where an individual has his or her true, fixed and permanent home, which is typically the location where an individual has the most significant legal ties (e.g. driver’s license, voting registration, vehicle registration, ownership of real property, enrollment of children in school systems, etc.).  Examples of situations where the tenant’s primary residence is not the facility being rented are an out-of-state resident vacationing in Maine or a Maine resident with a home in Bangor who is vacationing on the coast. An example of a situation where the tenant’s primary residence is the facility being rented is an individual who is renting a house, condominium, or apartment and does not maintain a primary residence elsewhere.

(3) “In connection with education” means in connection with education from an accredited secondary school or college at which the person is enrolled in a diploma or degree program. If a person claims that the rental is in connection with education, that person must provide the facility with a statement from the school that the tenant is enrolled in a program.

(4) “In connection with employment” means that the tenant is residing away from the tenant’s primary residence due to job requirements such as an electrical contractor in northern Maine who has a job in southern Maine, a professor who is temporarily reassigned to another college, or a representative of a company who is temporarily assigned to Maine to oversee the installation and operation of its product. A person who is residing away from a primary residence while seeking employment does not meet the exemption, nor would a person who is making occasional business contacts while vacationing in Maine. If a person claims that the rental is in connection with employment, that person must provide the facility with a statement from the employer that the rental is required by the person’s employment.