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Panel Moves to Reverse Ruling Imposing Taxes on Meals Prepped by Nonprofits

Members of the Legislature’s Taxation Committee have voted to draft language that would exempt the tax on prepared meals from small, non-profit organizations like churches and American Legion halls.

The groups told lawmakers they were outraged at a recent decision by Maine Revenue Services to impose the tax.

Several representatives of church groups and veterans organizations said they were surprised and upset when they found out last fall they were supposed to be collecting the 8 percent state sales tax on prepared meals that they sold to fund their operations and charitable activities.

Sen. Tom Saviello, a Republican from Wilton, sponsored the legislation. He says a dinner that Fayette residents use to raise money to help pay the home heating bills of the poor is now subject sales tax.

“It’s a kind of great big grand casserole dinner,” he says. “They all bring in their food and then they charge each other five bucks to come and eat their own food. I don’t think the intent of us is to tax that at 8 percent, I really don’t believe that.”

Maine Revenue Services has interpreted that the tax on meals law applies to all prepared food, no matter who is preparing it, unless there is a specific exemption. But with that interpretation, many small nonprofits find themselves facing extra costs to comply with the law, including buying a cash register so there would be a printed record of the transaction.

Crystal McKay of Otisfield says small groups like the American Legion Auxiliary are faced with additional paperwork to raise a few thousand dollars a year to support themselves.

“You are asking volunteers, secretaries and treasurers to do one more thing, and it’s just going to prevent us from earning money to keep our halls open,” she says.

Often the community events are aimed at providing a balanced, nutritious meal for those who cannot afford one prepared at a restaurant and who are hard pressed to make one at home.

The Rev. Margaret Proctor of Wilton says because of that, church groups often really don’t want to ask those folks to pay a tax on the nominal fee charged for the meal put together by volunteers.

“One option that the church council discussed was absorbing the meals tax,” she says. “This would strain a treasury already taking from reserves to make ends meet.”

But the bill, as drafted, contains broad language that would exempt meals sold by any nonprofit group, regardless of size. That caused the Maine Restaurant Association to oppose the bill.

“An incorporated nonprofit organization is a definition that also covers universities and colleges, and they run pretty sizable meetings and events businesses,” says Greg Dougal, the association’s president. “I can assure you one way to surely kill this with a fiscal note is to include those large entities.”

A fiscal note is the estimated cost of legislation, in this case how much sales tax revenue is likely to be lost if the bill becomes law.

Members of the committee who were present voted unanimously to support a version of the legislation that would exempt small nonprofits from having to collect the tax. They asked committee staff and Maine Revenue Services to draft the language to accomplish that goal.

The proposed amendment will be reviewed next week before it is sent to the full Legislature for its consideration.