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In 2005, the State of Maine had the dubious distinction of being #1 on the Tax Foundation’s list of the least tax friendly states.
Every year “Mainiacs” (myself included) pay an estimated 13% of their income in the form of income, property, sales, and vehicle taxes.
Today, I offer an inside look at vehicles taxes a resident of Maine must pay for the privilege of owning and operating a vehicle in the state.
Sales Tax:
When you buy a new vehicle in Maine, you are required to pay the state’s sales tax rate of 5%. When you sell the vehicle, the person that buys it from you is also required to pay sales tax based on what you sold it to them for.
Later, when that person is finished with the vehicle and sells it, the third owner is then required to pay sales tax on the vehicle. This cycle of taxation continues until the vehicle is taken out of service.
Under this taxation scheme, it is entirely possible for the state to receive 10% (or more) of the vehicle’s original sale price in the form of sales tax.
Excise Tax:
In addition to paying sales tax on new and used vehicles, Mainers are also required to pay what is known as an “Excise Tax”. This excise tax (some states call it a “road tax)is paid yearly to your local municipality and is based off the MSRP, and model year of your vehicle.
It doesn’t matter what price you and the dealer agree to, Maine only cares what the Manufacturer’s Suggested Retail Price of the vehicle. If the MSRP for your new Ford Expedition is $40,000 but you only paid $30,000 you still have to pay Excise Tax on the $40,000 MSRP.
The state offers an ambiguous reason why the excise tax is based on the MSRP on its official state website.
Excise Tax was designed with equity in mind. In 1925, this tax was enacted as a Maine Law. At that time, the Legislature decided that the fairest tax assessment would be based on what the manufacturer suggests it sell for.
This law remained in effect for over 75 years to ensure that everyone who drives the same vehicle pay the same amount of tax.
This may have worked 75 years ago, but now that the country is in a recession, and automobiles are selling for 25% or more off of MSRP, I feel it is time this law be reexamined.
How Maine Vehicle Excise Tax is Calculated:
Excise Tax is calculated by multiplying the MSRP by the mil rate as shown below. The rates drop back on January 1 st of each year.
YEAR 1 .0240 mil rate
YEAR 2 .0175 mil rate
YEAR 3 .0135 mil rate
YEAR 4 .0100 mil rate
YEAR 5 .0065 mil rate
YEAR 6 .0040 mil rate
For example, a 3 year old car with an MSRP of $19,500 would pay $263.25
{ 2 comments… read them below or add one }
My husband and I are trying to find a way to move out of Maine due to all the taxes. The excise tax was the final straw for me. We are encouraged to trade in clunkers for newer, more eco-friendly vehicles, but punished if we do.
I am buying a 2007 model year vehicle today. It was first bought and registered in 2006 (year 1). Then there was 2007 (year 2), 2008 (year 3) and 2009 (year 4) (.0100 mil rate) for the original owner. When I go to the town office do you suppose they will say 2007 is year 1, 2008 is year 2 and 2009 is year 3 (.0135 mil rate)? Of course they will, the thieving b@$+@rd$!