AUGUSTA – Some part-time artists, craftspeople and microbusiness owners in Maine fear they will be forced out of business when a new state tax law takes effect July 30.

The measure no longer will allow any artisan, cottage industry or microbusiness with less than $10,000 a year in gross sales to hold a so-called “resale certificate,” commonly called a “tax number,” which allows them to avoid sales tax.

Maine Revenue Services says fraudulent use of resale certificates costs the state millions of dollars in lost tax revenue each year, and the new law is designed to ensure “that only bona fide retail businesses can make tax-exempt purchases for resale, and by reducing the likelihood that legitimate retailers can use resale certificates to avoid payment of tax on items that are not intended for resale.”

Judy Groves of the 700-member United Craftsmen of Maine begs to differ with Maine Revenue Services’ wording.

She estimated the change would affect at least 65 percent of the United Craftsmen’s membership.

“These are bona fide retail businesses,” she said Sunday.

“I can understand cracking down on those hobbyists that are purchasing items not for resale, but this punishes those people legitimately supplementing their income and trying to incubate small businesses.”

Those affected stress that microbusinesses are the backbone of Maine’s economy. They say they have no problem paying their fair share of taxes, but that loss of wholesale buying power – which the tax number allows – will put them out of business.

Many suppliers offer discounts of 30 percent to 50 percent to artisans with the tax numbers; some companies won’t even do business unless a buyer has the number.

There are hundreds of part-time Maine artisans working in their attics, garages, small studios and kitchens that quietly support Maine’s economy with their products. They buy parts to fix lawnmowers, purchase canvas and paints for art, buy fabric to sew decorative flags and even buy wood to make souvenir Maine lighthouses.

Many buy local and sell local, keeping the money circulating close to home.

Trudy Ferland is a bead artist in Pittsfield who will lose her tax-free status under the new law.

What began as a hobby in a converted living room has blossomed into a cottage industry for Ferland. She makes about $4,000 a year selling her one-of-a-kind jewelry. That’s a dollar amount that supplements her salary as a part-time school librarian. “I’ve doubled my sales each year,” she said, “but I’m still a long way from $10,000. It takes a lot of $10 earrings to make $10,000.”

At $4,000 in sales a year, Ferland’s tax debt would be $200. But she estimates that she saved more than $2,000 in supply costs by using her tax number to buy wholesale.

One of the Maine bead stores where Ferland buys her supplies is Beadin’ Path in Freeport.

Clerk Kristen Phaneuf said that at least 40 percent of the store’s customers would fall into the below $10,000 category. If those customers stopped buying beads for resale, it would devastate the business.

Jodi Clayton does hand felting and sells felting kits from her Orono home.

“There are certain companies, suppliers, that won’t even deal with you without the tax number. Having it makes all the difference in being competitive,” she said.

Clayton said one example is the dyes she uses, manufactured in Cushing, which she can buy at half price with her tax number.

“My money is going right back into the local economy,” Clayton said. “Cottage industries are an important and historic part of Maine’s local economy.”

Handmade goods are such a competitive industry, she said, that new and small businesses will be unable to survive against people and businesses with more buying power.

“This will put hundreds and hundreds of small businesses out of business,” said Hazel Littlefield of Brooks, who has made stained-glass creations for 25 years. Littlefield said that without the wholesale status, new businesses “will go down the tubes in less than five years.” Although she is a full-time artist and over the $10,000 threshold, Littlefield said she is contemplating retiring and cutting back on her business.

“I would have to double my prices,” she said.

“The Maine crafts industry is under such pressure from overseas,” she said. “The minute something becomes popular in Maine you suddenly see the exact same item made in China. In the Christmas Tree Shop in Portland, there are 35 pieces of stained-glass items all under $15. I can’t compete with that.”

Meanwhile, Cherie Millett of Rockport doesn’t know what to do. A basket maker, Millett had been considering taking her art to a full-time business status. “My average basket sells for $35. I would have to double my prices to $70, and that basket wouldn’t sell. It looks like I’ll have to reassess my career.”

Seminars are being held across the state by the Maine Revenue Services to explain the changes and how they will affect businesses. To find the individual seminar in your area, call 624-9693 or visit www.maine.gov/revenue.