Robert Pleau, owner of Pleau’s Market in Winslow, hired a company to help him change his cash registers and credit card readers in anticipation of Tuesday’s meals and lodging tax hike.

At Barrels Market in Waterville, employees made the adjustment themselves.

Additional Photos

Robert Pleau, left, and his father Bill, owners of Pleau's Market in Winslow, today are getting ready for a mandated tax increase, which will raise sales tax a half-percent to 5.5 percent and meals and lodging tax up a percentage point to 8 percent. Cashier Lateaka Brewster, right, assists customers in background. Staff photo by David Leaming

“Basically, we have a point of sale that works with a computer system. You can go in and adjust the sales tax,” said Melissa Hackett, store manager. “The kind of retail we do, we need to make changes constantly depending on how the register reads certain items and we have the office end of the equipment to change it.”

The tax increases — meals and lodging tax went from 7 percent to 8 percent and the sales tax rose from 5 percent to 5.5 percent — were the result of a state budget compromise crafted by lawmakers in June to avoid a possible state government shutdown.

The machinery isn’t the only thing that has to be adjusted — store owners are also waiting to see how customers react to higher prices. But so far, everyone expects people will take it in stride.

“Most people who’ve come in to shop are aware of the changes and what’s coming,” said Pleau. “It adds a little more cost to everyone, but it’s the law and you have to deal with it.”

Hackett said that not much noise has been made by her customers about the change in sales tax.

“No one has said much about it, and it’s a small enough increase that I don’t think they’ll take much consideration into it,” she said.

Many restaurants are adjusting prices so the tax doesn’t make the numbers less appealing.

“We’re just going to be rounding prices to the closest zero,” said Stan LaPointe, owner of the Pointe Afta bar in Winslow. For instance, if a draft now costs $3.18, it will be rounded to $3.20. The change shouldn’t affect the food prices, he said.

“It’s not the end of the world,” LaPointe said. “Some people just need to be creative with their funds, but some can’t afford to do it.”

Some in the state’s hospitality industry are more concerned that higher prices, even if only several cents more, could make people rethink how much they spend when they go out for a bite to eat or book a room.

The taxes on a $50 meal will go up 25 cents. For a $150 hotel room, taxes will rise by 75 cents.

“Overall, I think the danger here is any time the meal goes up overall, then folks think twice about how often they’re going to go out,” said Richard Grotton, president and CEO of the Maine Restaurant Association.

Another complaint is that the added revenue from the tax hike will end up in the state’s coffers, not in the cash registers of business owners who have avoided raising prices themselves.

“This is sort of like a self-imposed increase by the state on people who are trying to collect as much rate as possible,” said Greg Dugal, executive director of the Maine Innkeepers Association.

Geoffrey Houghton, owner of The Liberal Cup in Hallowell, said his customers generally look at the bottom line of what their meals cost and won’t differentiate the amount raised by taxes.

“Unfortunately, the customer is going to notice the increase in the bill, but I’m not getting any more,” Houghton said. “I’m not raising my prices because of the economy, so I’m a little disappointed the taxes are going up.”

The Legislature passed the two-year, $6.3 billion budget in June with the tax increases to prevent a possible government shutdown. The sales, meals and lodging tax increases are projected to raise $183 million for the state over the next two years — $135 million from sales and $48 million from meals and lodging, according to the Maine State Legislature Office of Fiscal and Program Review.

Gov. Paul LePage vetoed the budget, but legislators overrode the veto with votes of 114–34 in the House and 26–9 in the Senate.

Sen. Roger Katz, R-Augusta, described the tax increases as a necessary compromise preferable to the likelihood that property taxes would have increased if the Legislature passed LePage’s proposed budget.

He said he, like other Republicans, would have liked to see more cuts to government spending instead.

“Nobody wants to raise taxes here, but the alternative to this would have been worse,” Katz said. “We would have eliminated revenue sharing in its entirety, and that means Augusta and every town and city in the state would have seen less state revenue and therefore some increase in property taxes.”

Municipal revenue sharing, a portion of the state’s sales and income tax revenues given to towns and cities to offset property taxes, was still cut by a third in the budget passed by the Legislature, but LePage had proposed in January to suspended it entirely for two years.

The state previously increased the sales tax from 5 percent to 6 percent in 1991, with the provision it would drop in half percent increments with certain increases to the general fund’s revenue, according to Michael Allen, Maine Revenue Service’s associate commissioner for tax policy.

That caused it to drop to 5.5 percent in 1998. Two years later the state decided to drop it back down to 5 percent.

The current increase is set end on July 1, 2015.

Some in the industries affected are concerned it could be permanent, but Katz said he expects the Legislature to honor the sunset of the tax increases.

He said part of the reason for preferring the lodging and meals tax increase over further increases to property taxes is a larger portion is borne by out-of-state visitors.

About 65 percent of lodging revenue is from nonresidents, and between 30 and 35 of prepared meals revenue comes from nonresidents, according to Allen.

Jesse Scardina — 861-9239
jscardina@mainetoday.com

Paul Koenig — 621-5663
pkoenig@mainetoday.com

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