Maine LLC Taxes

If you're looking to form an LLC in Maine, it's important to understand the state's unique tax requirements. 

This guide on Maine LLC Taxes will provide you with a comprehensive understanding of the key tax responsibilities for LLCs in Maine, equipping you with the necessary knowledge to successfully navigate these obligations.

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

How Is an LLC Taxed in Maine?

Taxation in Maine isn’t applied in the same way to all LLCs – instead, it varies depending on a number of factors, such as an LLC’s nature, locality, and tax election.

While LLCs typically benefit from pass-through taxation by default, they can elect to be taxed as one of the following:

• C Corporations: The LLC is treated as a separate entity to its owners, paying corporate income tax rates on its total profit while the owners also pay personal income taxes on any distributions they take.
• S Corporations: In return for paying owners a “reasonable salary,” the LLC’s remaining profits are distributed among members without a need to pay self-employment tax or FICA tax on them.

The following sections go into the various tax responsibilities of your LLC at local, state, and federal levels in Maine to help you ensure your LLC navigates them effectively.

Maine Local Taxes

In Maine, local tax regulations vary by municipality, and there are several unique taxes in place. 

Below, we've broken down these local taxes you may encounter with your LLC.

Local Option Sales Taxes

The standard sales and use tax rate is 5.5%; having said that, some municipalities have added a local option sales tax on items like prepared food and short-term lodging, which can be as high as 1%. This raises the total sales tax rate to potentially 6.5%. As of October 21, 2023 municipalities have implemented this additional tax. 

Note: To find the sales and use tax rate that’s in effect in your area, we recommend using the Maine Revenue Services website or consult with a local tax professional. 

Property Taxes

Property taxes in Maine are established by local municipalities, where they assess the market value of properties based on the Maine Constitution's guidance. This guidance interprets "just value" as equivalent to fair market value, which is then used as the basis for calculating property taxes.

In areas outside local municipalities – notably Maine's Unorganized Territory (UT) – property tax assessment and collection are managed by the state's Property Tax Division. 

For specific details on how property tax works in your area, you'll need to contact your local municipality's offices:

• Municipal Tax Assessor's Office: For inquiries about property assessments, tax rates, and exemptions.
• Municipal Tax Collector's Office: For questions regarding tax billings, payment schedules, and options.

Note: You can find contact information for your local municipal offices on your city or town's official website or through Maine's municipal directory.

Recommended Service: Schedule a free consultation with 1-800Accountant to ensure your business remains legally compliant.

Maine State Taxes

Every state has its own regulations and rules that dictate how it taxes individuals and businesses. Below is a list of the most relevant state-level taxes for LLCs in Maine. 

Corporate Income Taxes

For LLCs choosing to be taxed as corporations, Maine applies a graduated Maine income tax on income sourced within the state by corporations. The tax rates start at 3.5% for incomes up to $350,000 and go up to 8.93% for incomes exceeding $3,500,000. This is relevant for those opting out of the default pass-through status (i.e., LLCs taxed as C corps). 

Note: Keep in mind that LLCs functioning as financial institutions or insurance companies, which are subject to Maine’s franchise or premiums tax, are exempt from this corporate income tax.

Individual Income Taxes

In Maine, LLCs are by default treated as pass-through entities for tax purposes, meaning the income passes through to each member’s personal income tax returns. In their default pass-through status, the members are subject to Maine's individual income tax rates, which are graduated and currently range from 5.8% to 7.15%.

Sales-Related Taxes

Maine's approach to sales and use tax differs from the more common uniform tax rate seen in many states. Maine implements a variety of rates for different categories, reflecting the state's tailored approach to taxation.

Below, we outline the main sales taxes applicable to various items and services:

• General Sales: A 5.5% tax applies to a wide range of tangible personal property and selected services, encompassing many everyday transactions.
• Prepared Food and Alcoholic Drinks: These are taxed at a higher rate of 8%, specifically in establishments licensed for on-premises alcohol consumption.
• Lodging Rentals: For short-term accommodations like hotels and motels, a 9% tax rate is charged.
• Short Term Auto Rentals: Rentals for vehicles like cars and vans for short-term use carry a 10% tax.
• Use Tax: Matches the general sales rate at 5.5%, targeting goods purchased without Maine sales tax but used within the state.
• Service Provider Tax: Certain services are taxed at 6% such as specific telecommunications and rental services.

Note: If your LLC sells taxable goods or services in Maine, you must secure a sales tax permit from the Maine Revenue Services.

Insurance Taxes 

In Maine, LLCs in the insurance industry are subject to specific tax regulations:

• Insurance Premiums Tax: Insurers in Maine are subject to a 2% tax on all gross direct premiums, with exceptions for captive insurers and risk retention groups. Captive insurers must file corporate income tax returns instead, while risk retention groups are obligated to file an annual return, exempt from estimated payments.
• Fire Investigation & Prevention Tax: Fire insurance companies must pay a tax of 1.4% on gross direct fire risk premiums in Maine, after deductions for returns and dividends.
• Non-admitted (Surplus) Premiums Tax: Licensed producers and entities with nonadmitted gross direct insurance premiums must pay a 3% surplus lines premiums tax on risks located in Maine.

Note: For each of these taxes, estimated payments and specific filing requirements are outlined in the respective Maine Form INS documents.

Franchise Taxes

The Maine franchise tax, applicable to banks and financial institutions, offers two taxation options. Option 1 combines 1% tax on Maine income with 0.008% tax on Maine assets. Option 2 focuses solely on assets, imposing a 0.039% tax on Maine assets. 

This tax affects all financial institutions with Maine income, including those organized as pass-through entities, such as LLCs operating in the financial sector. LLCs in this category must consider which tax option aligns best with their financial structure and operations in Maine.

Motor Vehicle Excise Tax

In Maine, LLCs using vehicles for their operations are subject to an annual excise tax, a prerequisite for vehicle registration. The tax amount depends on the vehicle's age and its Manufacturer's Suggested Retail Price (MSRP). 

The calculation is based on a decreasing mill rate, starting from 0.0240 for new vehicles to 0.0040 for those in the sixth year and beyond. This tax is payable at the local town office where the vehicle owner is registered.

Federal Taxes

Regardless of where your business is located, if you run an LLC in the US, there are a number of federal taxes you’ll need to pay. Below are some of the main types your LLC may be required to pay for federal tax purposes:

Income Tax

By default, the Internal Revenue Service (IRS) will not treat single and multi-member LLCs as separate entities from you for tax purposes. What this means is that you’ll need to report your share of your LLC’s profits on your individual tax returns and pay federal income tax on them at the personal rate of your tax bracket.

Having said that, keep in mind that LLCs can also elect to be taxed as C corps or S corps, which changes how these taxes are levied in different ways.

Self-Employment Tax

In addition to income tax, members of single- and multi-member LLCs will need to pay federal self-employment taxes on the share of the business’s profits that they report on their personal tax return at the end of the year.

This tax is levied at a flat rate of 15.3% against businesses with net earnings that exceed $400, though it is applied slightly differently to LLCs that have elected to be taxed as S corps or C corps.

Employer Taxes

If your LLC hires any employees, it will need to withhold a portion of their salaries to cover various types of taxes on your employees’ behalf – including Social Security, Medicare (FICA), and payroll taxes.

Furthermore, the members of any LLCs that have elected to be taxed as an S corp will be required to pay employment taxes on their salaries. However, in return for this, the remainder of the business’s profit after these salaries have been distributed will be safe from both self-employment and FICA taxes.

Excise Tax

If your LLC engages in certain types of business (such as the sale of alcohol and tobacco or operating a heavy highway vehicle, among others), it may need to pay federal excise taxes in order to do so legally. Each excise tax comes with its own set of rules, rates, and filing obligations you’ll need to be aware of.

Understanding and fulfilling these federal tax obligations is crucial for keeping your LLC compliant and avoiding unnecessary financial penalties and/or fines.

How to File LLC Taxes in Maine

Below, we’ve outlined the general process an LLC in Maine will need to follow in order to file their tax return correctly. Note that the specificities of each step will vary slightly depending on how your LLC is organized and the specific locality it’s based in.

Step 1: Gather Your Documentation

To ensure accurate tax filing, thorough record-keeping is essential. Begin by collecting your personal information, including:

• You and your partner’s Social Security number, date of birth, and residential address
• The previous year’s tax returns
• Your LLC’s Federal Tax Identification Number or Employer Identification Number (EIN)

Then, you’ll need to gather all documentation related to your business’s income, such as:

• Invoices you’ve issued
• Sales transaction logs
• Electronic payment reports from services like PayPal or Stripe

Lastly, assemble all records pertaining to your business expenses, which should cover:

• Lease receipts for your business premises
• Bills for utilities
• Records of office supplies purchases
• Documentation of business-related travel
• Payroll records for employees

Note: Depending on how your LLC is organized and its tax election, you may need different information for your tax return. 

Step 2: Find The Right Tax Forms

Once you've gathered all necessary documents, the next step is to select the correct tax forms for your LLC based on its organization:

• Single-Member LLCs: The business’s total income and expenses are reported on a Schedule C form, which is attached to the owner’s personal tax return and due by April 15 or the following business day if it lands on a weekend or holiday.
• Multi-Member LLCs: File an information return using Form 1065. Members must fill out a Schedule K-1 showing their individual earnings or losses by March 15 or the next business day.
• C Corporations: File a corporate tax return using Form 1120 by the April 15 deadline or on the next business day if it's a weekend or holiday.
• S Corporations: Use Form 1120-S for the corporate tax return and distribute Schedule K-1 forms to shareholders for reporting their shares of profits or losses. The deadline for filing taxes using 1120-S is March 15 or the following business day.

Since state and local taxes will have their own individual forms and requirements, we recommend contacting your municipality or hiring an accountant for guidance.

With the appropriate documentation gathered and the correct tax forms for your business entity on hand, you’ll be ready to fill them out and submit them.

Step 3: File Your Taxes

The majority of businesses choose electronic filing for its speed, enhanced security, and reliability compared to paper filing, which can be slower and more prone to errors. Here’s how it works:

• Federal Tax Returns: The IRS provides two electronic services for tax submission: Free File for businesses with an AGI below $72,000 and Free Fillable Forms for those above the threshold.
• State Tax Returns: For efficient filing of your state tax returns, use the Maine Tax Portal, a complimentary online service offered by the Maine Revenue Services.
• Local Tax Returns: Due to the varying procedures for filing local taxes, make sure to reach out to your local tax authority for detailed information. 

Note: These electronic filing tools are best suited for those who are already confident in handling their LLC taxes as if filling out a paper form. 

For new business owners, we recommend opting for the expertise of a tax professional in order to ensure both accuracy and compliance in your tax filings. 

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

Keep Your Maine LLC Compliant

While LLCs are generally easier to maintain than corporations, there are certain state and local formalities your LLC must satisfy in order to remain compliant. 

Maine LLC Annual Report

Maintaining good standing for your Maine LLC requires filing an annual report with the Maine Secretary of State. This report must be submitted by June 1 of each year and can be done either online or by mail.

To file online, visit the Maine Secretary of State's website and follow the instructions provided. For mail submission, download the Maine LLC annual report form, complete it with your LLC's information, and mail it, along with a $85 filing fee, to the specified address.

Keep in mind that failure to file your annual report within the required timeframe can result in the administrative dissolution of your LLC.

Licensure and Tax Requirements

In Maine, almost all businesses are required to obtain various licenses and permits at the local, state, and federal levels. Below, we’ve broken down three of the most common types your LLC may need:

• Sales Tax Licenses: LLCs selling or leasing taxable goods or services in Maine must obtain a sales tax license from the Maine Revenue Services. This process can be completed online by visiting the Maine Revenue Services website.
• Professional Licenses: Specific professions in Maine, such as healthcare, law, and engineering, require professional licensing. These licenses are issued by respective state boards or departments, such as the Maine Board of Licensure in Medicine for healthcare professionals.
• Environmental Permits: LLCs in activities impacting the environment (e.g., construction, waste disposal) may need to obtain permits from the Maine Department of Environmental Protection (DEP), ensuring adherence to environmental regulations.

Note: For a full list of the statewide licenses and permits your LLC may need, refer to the Maine Business Licenses & Permits Guide provided by the state’s Business Permit Office.

Maine LLC Taxes FAQs