Excise tax protests prompt legislation

AUGUSTA – Mainers who thought they got a great deal on a new car or truck as a result of many types of sales incentives are finding their bargaining skills do not help when it comes to the excise tax they must pay to register their vehicles. The tax is based on the sticker price – not the sale price – and several lawmakers are proposing that change.

“I heard from a lot of people on the campaign trail,” Sen. Bruce Bryant, D- Dixfield, said last week. “People were surprised at how much more they had to pay in taxes than they thought they had to pay.”

Bryant is one of eight lawmakers with legislation that deals with the excise tax on motor vehicles. Rep. Herbert Clark, D-Millinocket, heard the same complaint over and over while he campaigned last fall. He said people gave him specific examples of how they were “hurt” by the tax policy.

“One person bought a program car and paid a legitimate dealer $15,900 for the car,” he said. “But the sticker price was $27,900, and he was shocked when he went to register the car. It’s unfair, and we need to do something about it.”

With the excise tax rate $24 per $1,000, the difference between sticker price and purchase price is more dramatic than in past years when incentives were fewer and the difference between the two sums was considerably less. The excise tax is due when the car or truck is registered.

Tom Brown, executive director of the Maine Auto Dealers Association, said deep discounts and other incentives offered in the past few years have increased public awareness of the way the tax is levied.

“Our dealers hear about it all the time,” he said. “People can get very angry about this.”

Geoff Herman of the Maine Municipal Association said the method of assessing the excise tax has been under attack for several years. He defended the current system as a matter of fairness.

“We see using the sticker price as a way to make sure the tax is implemented fairly whether you buy a car in Kittery or in Fort Kent,” he said. “There is also an issue for us in the ease of administration of this tax.”

Herman said while consumers are benefiting from the wide array of sales incentives, those various schemes would make it very difficult for municipal officials to determine the actual sale price of the vehicle. He said it would be very difficult for city and town clerks to look at a sales agreement and figure out what the actual purchase price is without training and uniformity in the way those agreements are written.

“With all the financing alternatives and give-backs, we think there would be serious problems with fairness in assessing this tax,” he said.

Hermann said municipalities count on the excise tax to pay for local road construction and repairs. He said there are more miles of locally maintained roads in the state than miles of road maintained by the state.

“There is a hydraulic relationship between the excise tax and the property tax; the less excise taxes municipalities receive, the higher the property taxes they will need to raise,” he said.

Clark, who served four years on the Millinocket Town Council, agreed the tax is important to cities and towns. But he said the current tax is unfair to taxpayers.

“We need to change this,” he said. “People believe this is an unfair tax because it is not based on what they paid as is the sales tax they pay.”

The concern is bipartisan with Republican lawmakers also proposing changes in the excise tax. Rep. Josh Tardy, R-Newport, the assistant GOP floor leader, said he is working on a bill to make changes in the excise tax.

“My bill will go beyond just this issue,” he said. “It’s still being drafted.”

Brown said a January 2002 study done by the Secretary of State’s Office indicated Maine’s excise tax is one of the highest in the nation and suggested a number of alternatives to the current structure. But lawmakers did not adopt any changes.

“There are ways to change the way the tax is assessed so the initial tax rate is not so high and spread it over a number of years,” he said.

Brown said legislation could be drafted that would not affect overall revenues to the municipalities by spreading the rate changes over more years and changing the rates.

“We need to do something,” Clark said. “Maybe there is some compromise that can be developed.”