How Maine nonprofits can prepare for the 2025 sales tax exemption
Photo / Courtesy, Brann & Isaacson
Jamie Szal, left, and Matt Pick, from Brann & Isaacson
In April, Gov. Janet Mills signed the 2024 supplementary budget, introducing a new sales tax exemption for 501(c)(3) organizations retroactively effective as of Jan. 1, 2024.
According to a report published by Maine Revenue Services in January, Maine was the only state in New England without a blanket exemption for nonprofits. As attorneys specializing in state and local tax, we recognize that this new exemption offers substantial financial relief that can significantly benefit Maine’s nonprofits.
Here’s how your organization can prepare ahead of Jan. 1, 2025.
Understand the benefits and eligibility
The new sales tax exemption is a significant change for Maine’s nonprofit sector. The key benefit is the potential for significant savings on purchases, where those purchases may previously have been subject to sales tax.
Nonprofits will be available to redirect funds that would have gone towards sales tax to their core missions. This can result in more resources for programs, services, and overall organizational growth.
Under the amendments, all 501(c)(3) organizations now qualify, but it is crucial that purchases primarily align with the organization’s purpose in order for the purchase to be exempt. Ensure that any goods or services acquired are directly related to the nonprofits mission and activities.
For example, purchases of supplies for an upcoming exhibition at your museum are related to the purpose of your non-profit. But purchases of bubble gum for the personal use of a single employee? Probably not. Understanding these criteria will help you fully leverage the exemption and avoid compliance issues.
Prepare early and gather documentation
Although Maine Revenue Services has not yet issued the new exemption certificate, the application process is anticipated to be similar to the current one. Preparing early will facilitate a smooth transition and immediate benefits once the exemption takes effect.
Start by reviewing your current expenditures to identify areas where the sales tax exemption can yield savings.
Analyze past purchases that have occurred in 2024 to evaluate whether you could seek a refund of taxes paid, and plan future acquisitions with the exemption in mind. Then gather all the necessary documentation. This typically includes proof of 501(c)(3) status and detailed descriptions of your organization’s purpose and activities.
Stay informed and educate your team
Regularly monitor announcements from Maine Revenue Services regarding the exemption certificate and application process. Staying informed will ensure you don’t miss critical updates or deadlines.
Equally as important is educating your team about the new exemption.
Make certain that all relevant staff members understand the exemption, its benefits, and how to apply it to purchases. A well-informed team will be better equipped to take advantage of the exemption and maintain compliance with all requirements.
With careful preparation and a proactive approach, Maine nonprofit organizations can be ready to benefit from the financial relief provided by the new sales tax exemption, enabling them to stretch their finances that much further to enhance their impact and further their missions.
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