Taxpayers Prevail in Several Maine Tax Cases

The Maine courts have recently issued important decisions in several tax cases, all of which were litigated by Pierce Atwood’s State and Local Tax Group.  Taxpayers received a partial victory in two Maine Supreme Court cases that clarify the application of Maine’s use tax to aircraft owned by nonresidents that were purchased prior to January 1, 2007.  The taxpayer was also victorious in a decision that limits the State Tax Assessor’s ability to refuse to produce documents in response to requests made under Maine’s Freedom of Access Act.

Applicability of Maine’s Use Tax to Aircraft

Maine’s Supreme Judicial Court has issued two decisions concerning the applicability of Maine’s use tax to aircraft that are purchased and based outside of Maine, Blue Yonder, LLC v. State Tax Assessor, 2011 ME 49,


Victor Bravo Aviation, LLC v. State Tax Assessor, 2011 ME 50.

In both cases the taxpayers argued that their aircraft, which had been purchased prior to 2007, had been used extensively outside of Maine and thus qualified for an exemption under 36 M.R.S. § 1760(45)(B).  This statute, before it was amended effective January 1, 2007, stated that property used outside of Maine during the first twelve months after purchase was not subject to sales or use tax.  As the taxpayers pointed out, there was nothing in the text of the exemption that required property to be used exclusively outside of Maine during that time in order to be exempt.  The Court agreed that the statute did not require exclusive use outside of Maine in order to be exempt, but found that § 1760(45)(B) was ambiguous as to exactly how much time an aircraft must be present in Maine before being subject to tax.  After considering this question, the Court decided that an aircraft must be substantially used outside of Maine during the twelve months after its purchase in order to be exempt from the State’s use tax.  Blue Yonder’s aircraft, which had only been present in Maine on 25 days during the first year after purchase, had been substantially used outside of Maine and was therefore exempt.  The Court refrained from determining exactly how often an aircraft could be present in Maine but still be considered to have been substantially used outside the State.  However, the Court held in Victor Bravo that the aircraft in that case had been present in Maine for too long to be considered used “substantially” outside of Maine.

This substantial use question only applies to aircraft purchased before January 1, 2007.  After that date an aircraft may only be used in Maine for 20 days (excluding certain maintenance and angel flight activities) before being subject to use tax.  36 M.R.S. § 1760(45)(A-3).

Court Orders State Tax Assessor to Produce Documents Under the Freedom of Access Act 

The Maine Superior Court has ruled that Maine’s taxpayer confidentiality statute, 36 M.R.S. § 191, does not protect the State Tax Assessor’s legal interpretations from disclosure under Maine’s Freedom of Access Act (“FOAA,” which is similar to the federal Freedom of Information Act).  Likewise, the Court found that that the mere presence of a taxpayer’s information within a document held by the Assessor does not make the entire document immune from disclosure under FOAA.  As a result, in response to a FOAA request for an internal memo discussing the Assessor’s sales tax treatment of certain types of medical equipment and copies of sales tax audit manuals, the Assessor was required:  (1) to redact any taxpayer specific information in order to protect taxpayer confidentiality; and (2) to produce the remainder of the requested documents.  Washburn v. State Tax Assessor, CV-10-521 (Me. Super. Ct., Cum. Cty., April 29, 2011) (Cole, J.).            

For more information about any of these cases, please contact:

Jonathan Block