2 tax hikes to affect smokers, diners Cost of food prepared by retailers to increase to 7 percent; groceries exempt

AUGUSTA – All Mainers who buy cigarettes and many who eat out face higher taxes, beginning Monday.

Effective Oct. 1, the Maine excise tax on cigarettes increases from 74 cents to $1 per pack of 20 cigarettes.

Also going into effect is a sales tax increase from 5 percent to 7 percent on all food prepared by a retailer.

The 7 percent rate previously applied only to establishments that were licensed to serve alcoholic beverages on premises.

Prepared food is subject to tax whether sold for consumption on premises or for takeout. Bulk sales of grocery staples are exempt.

Asked if state tax officials anticipated transition problems, Tony Neves, who heads the state taxation department known as Maine Revenue Services, said Friday, “Not on any large scale.”

The cigarette excise tax is imposed at the distributor level. Retailers will be affected by the cost of cigarettes purchased on or after Oct. 1, and by a requirement to report directly to the state all cigarettes in inventory at that time and remit the additional tax on their inventory.

“That’s very straightforward,” Neves said.

More complicated is the so-called meals tax hike, which actually applies to all food that any retailer prepares.

A Maine Revenue Services advisory says the increase will affect “all forms of prepared food, from coffee or a steamed hot dog sold by a convenience store to a meal sold by a fast-food chain.”

Tax officials note that the prepared food tax hike will impose multiple rates of tax in many retail establishments.

“For instance, a convenience store selling prepared food will be faced with collecting 7 percent tax on food that they have prepared such as coffee or steamed hot dogs, and 5 percent on taxable items such as soda, beer and candy,” the tax department advisory says.

Neves said state tax officials consulted with grocers and other businesses in developing advisories about the tax changes and have disseminated information widely.

“I think the industry has made an effort, as we have, to prepare themselves for this,” he said.