Both the House and Senate have failed to adopt a measure that would have authorized cities and towns throughout Maine to collect up to a two percent local option sales tax on temporary rental accommodations.
Sponsored by Rep. Gary Friedmann (D-Bar Harbor), LD 746 would have allowed municipalities to generate revenue from this tax and use it for whatever purpose they deemed necessary.
This additional two percent tax would have been levied alongside the state’s existing nine percent lodging tax, bringing the total tax levied in some areas to as much as 11 percent.
Lawmakers on the Taxation Committee were divided over this proposal, with all Democratic members voting in support of an amended version of the bill alongside Rep. Russell P. White (R-Ellsworth). The remaining Republicans on the Committee all voted against the proposal.
Under this version of the bill, municipalities would be prohibited from approving seasonal sales taxes, a tactic that some areas may have wished to employ in order to shift the burden onto tourists and others who are only the state for part of the year.
The amendment approved by the majority of Committee members would have delayed the earliest potential start date for such taxes to January 1, 2027.
Additionally, it would have allowed those who report sales tax collected from casual rentals on their individual income tax returns to not collect and remit the additional local option sales tax.
During a public hearing earlier this year, Rep. Friedmann suggested that this bill would create property tax relief for those who have experienced double-digit increases in recent years.
“With the rapid growth of short term rentals,” Friedman said, “any small towns without hotels could stand to gain [a lot of revenue from this tax].”
When asked if this would deter visitors from choosing Maine as a vacation destination, Friedmann contended that they are less “price-sensitive,” projecting that an additional two percent fee would not push them away from visiting.
Bar Harbor’s Town Manger and South Portland’s City Manager both spoke in favor of LD 746, citing the freedom it provides local governments to utilize funds as necessary for a variety of municipal expenses, including for police and fire services, as well as the maintenance of roads and other infrastructure elements.
Testifying in opposition to the possibility of a local option sales tax on lodging were many of those directly involved in the hospitality and tourism industry, including a representative of Hospitality Maine and the Maine Tourism Association, as well as those who work in the industry directly.
One Boothbay Harbor resident and vacation rental business owner, Audrey Miller, highlighted how she has seen bookings slow in comparison to 2019.
Alexis Miller of Cottage Connection of Maine in Boothbay Harbor noted a nine percent drop statewide in visitors from 2023 to 2024.
Nate Cloutier of Hospitality Maine and the Maine Tourism Association argued against allowing municipalities to adopt an additional lodging tax because businesses in the industry “cannot afford another competitive disadvantage.”
Attempts in both the House and Senate to accept the Committee’s majority Ought to Pass as Amended report failed with roll call votes, leading to lawmakers in both chambers to advance the minority Ought Not to Pass report by default.
Consequently, the bill was placed in the legislative files as dead and will not be considered any further this session.
