Senate president proposes bill to eliminate tax on bottled water

AUGUSTA – Maine Senate President Michael Michaud said he wants the state to immediately stop charging sales taxes on bottled water, and is introducing a bill to clarify the tax shouldn’t be charged.

“This attempt by state government to tax bottled water

is absolutely outrageous,” said Michaud, D-East Millinocket.

But a Maine Revenue Services official said Wednesday that the law is clear that bottled water should be taxed.

Michaud said state tax officials directed stores to collect the tax as the sales tax on dozens of packaged munchies was about to be lifted as of Jan. 1. The “snack tax” repeal will cost roughly $15 million in lost revenues this fiscal year.

The Legislature last year voted to eliminate the snack tax as of the start of 2001 after a citizen initiative to abolish the levy was launched.

The tax on dozens of snacks such as ice cream, bread sticks, frozen yogurt, muffins and pretzels was enacted when the state was in deep fiscal crisis a decade ago. Its opponents labeled the tax as a gimmick.

“Bottled water is a necessity, not a snack item and it should be tax-exempt just like other groceries,”

Michaud said in a prepared statement. He said attempting to expand the tax on bottled water on the same day the snack tax was lifted was “shameful.”

“It should be stopped immediately,” Michaud said.

His bill would clarify that Maine’s sales tax exemption for potable water covers bottled water. The director of the Revenue Services’ Division of Sales, Fuel and Special Taxes acknowledged his agency sent out a notice prior to the new year telling stores to charge the tax on bottled water.

“It has nothing to do with the snack tax,” said the official, Peter Beaulieu.

Maine law exempts “residential” water – water used in homes – from the sales tax, Beaulieu said. But the law does not include bottled water under its definition of grocery staples, and therefore it’s not exempt from the tax, said Beaulieu.

He said the issue has been clouded by a change in policy on taxation of gallons of bottled water. In the past, gallons were presumed to be for home use and therefore exempt.

“We are no longer making that presumption,” Beaulieu said.

He added there is no dispute that carbonated water is subject to the tax.