Some Maine residents who live in towns that border New Hampshire have been skirting the excise tax on their cars and trucks by claiming residency in the “Live Free or Die” state.
Those who violate state law face a steep fine of about $900 if they get caught.
Estimates vary on how many Mainers have been evading the state’s excise tax. But while the tactic has been employed for years, mostly in York County towns, at least one community is getting tired of losing money.
Jason Cole, chairman of Lebanon’s Board of Selectmen, said the town recently hired a constable dedicated to identifying, securing evidence and then prosecuting violators. Cole said the town already has developed a list of at least 200 potential violators.
“All you have to do is go to the school and look at the number of parents picking up kids who have New Hampshire plates,” he said.
State law requires registration of any vehicle that is parked or garaged in the state of Maine for more than 30 days. The $35 registration fee goes to the state to help maintain the motor vehicle database. The excise tax — based on a formula that considers the age of the car and its manufacturer’s suggested retail price (MSRP) — goes directly to municipalities, which typically use the funds for local road maintenance.
The automobile excise tax in Maine can be as much as 33 percent higher than the tax in New Hampshire. The tax on a brand new car with a list price of $25,000, for example, is $600 in Maine, compared to $450 in New Hampshire. The difference is generally less for older cars. The tax bottoms out in year six in both states — to $100 in Maine and $75 in New Hampshire for a vehicle that originally listed for $25,000.
Motor vehicle excise taxes have long been a concern for some Mainers. In 2009, voters defeated a referendum to reduce excise taxes for newer and more-fuel efficient vehicles, a proposal promoted by conservative groups including the Maine Heritage Policy Center. Proposed changes to Maine’s excise tax system came up again during the 125th Legislature but didn’t go anywhere.
Cole said Lebanon made an effort to target scofflaws about three years ago, but he said the focus on tax violators has waned. Other border towns, including Kittery, Berwick and South Berwick, have similar problems with excise tax evaders; but law enforcement officials say limited resources make it hard to catch violators.
Lt. Russ French of the Kittery Police Department said his department used to have an employee dedicated to excise tax evasion who would write between 100 and 150 summonses a year. When that employee retired about a year ago, the position was left vacant because of budget cuts. Now only a handful of excise tax violators are caught each year, he said.
“It’s always an issue for us, but having the time to deal with it is the problem,” French said. “You can’t just see a New Hampshire plate and assume wrongdoing. You have to track them for 30 days and be sure before you can start throwing accusations.
Some towns may not even know how big the problem is.
York County Sheriff Maurice Ouellette, whose agency polices some of the border towns, said that when someone is issued a summons for excise tax evasion, the actual crime is likely to be failure to register or improper registration. That means law enforcement agencies do not distinguish between those who are registering in New Hampshire to avoid excise taxes and those who fail to register in Maine for other reasons.
Capt. Jerry Locke of the Berwick Police Department said from 2008 to 2012, officers issued only 28 summonses to people who improperly registered their vehicles in New Hampshire. However, he estimated that in that time, hundreds more scofflaws were given warnings and ended up registering their cars properly to avoid the fine.
“We’re looking for voluntary compliance,” he said. “Once they realize it’s cheaper (than paying a fine), they usually take care of it.”
The problem might be more acute in border towns, but as a statewide issue, excise tax evasion is minor, according to Mike Allen with Maine Revenue Services. In 2010, the Legislature asked the agency to look into the problem. Allen said eight months of study uncovered a total of 66 cases, according to a December 2010 report.
“Did we find some people? Yeah, but not enough to say, ‘We should devote (state) resources to this,’” he said.
Maine Secretary of State Matthew Dunlap said excise tax evasion may be a real problem for towns, but his office does not have the resources to police it.
New Hampshire authorities have no incentive to discourage Maine residents from registering cars in their state, since it means more revenue for New Hampshire.
Unlike Maine, New Hampshire also does not mandate that owners buy insurance on their vehicles.