Federal bill would ease taxes on Maine car dealerships facing supply chain issues

Photo / Renee Cordes A congressional bill cosponsored by U.S. Sen. Angus King, I-Maine, would ease the effects of supply chain challenges on car dealerships facing higher costs and limited inventory. Shown here is Yankee Ford in South Portland.

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By Renee Cordes

A congressional bill cosponsored by U.S. Sen. Angus King, I-Maine, aims to ease the effects of supply chain challenges on car dealerships facing higher costs and limited inventory.

The Supply Chain Disruptions Relief Act would adjust taxes for dealerships that cannot maintain a minimum level of inventory, so that businesses don’t pay the price for supply chain shortages beyond their control.

"Rising costs for car dealerships have contributed to high inflation, which is squeezing household budgets across Maine and the nation," King said. "Let’s pass this bill quickly, so we can ensure our local businesses aren’t subjected to unnecessary tax burdens that get passed on to consumers.”

Industry representatives welcomed the initiative.

“From necessary production parts being unavailable to transportation systems that are jammed up, supply chain issues are making it difficult for Maine’s franchise auto dealers to get and maintain inventory,” said John Emerson, head of the Augusta-based Maine Auto Dealers Association.

He also noted that more than half of Maine's car dealers, including many smaller family-run operations, are currently on a so-called "last in first out" system, where a drastic drop in inventory results in a taxable phantom profit.

"Dealers are asking for three years of relief to let inventories rebuild — this is not a forever forgiveness, but this would give dealers some time to recover," Emerson said.

Adam Lee, chairman of Lee Auto Malls with 17 dealerships from Bangor to Saco, had a similar observation.

"This sort of adjustment could be extremely helpful since the current, very unusual situation with drastically reduced inventory could cause huge tax bills," he told Mainebiz.

Automobile supply chains worldwide have been significantly disrupted during the pandemic.

The Supply Chain Disruptions Relief Act would provide a statutory determination that the requirements for a qualified liquidation under Section 473 of the U.S. Code have been satisfied for new motor vehicle dealers that have had a reduction of new vehicles held in the Last In First Out inventory system.