Technology Tax Credits

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Maine offers tax credits and sales tax exemptions for businesses engaged in certain specialized areas. In general, R & D tax credits are based on federal IRS rules and applied for as part of a company’s state corporate tax return. Sales tax exemptions are applied either at the time of purchase using an Industrial Users Blanket Sales Tax Certificate of Exemption (PDF) or as a refund with the Refund Form (PDF).

Research Expense Tax Credit

The credit is based on a percentage of the federal Credit for Increasing Research Activities. Limitations: the credit is limited to 5% of the excess qualified research expenses over the previous three-year average plus 7.5% of the basic research payments under IRC § 41(e)(1)(A). The credit is further limited to 100% of the first $25,000 in tax liability plus 75% of the tax liability in excess of $25,000. The credit cannot be carried back, but can be carried forward for up to 15 years. Form and Instructions (PDF).

Super Research and Development Credit

The credit is based on qualified research payments exceeding 150% of the average for the three-year period prior to the effective date of the credit. Limitations: the credit is limited to 50% of the tax otherwise due after all other credits. Further, the credit cannot reduce tax liability below the amount due the previous year after credits. The credit cannot be carried back, but can be carried forward for up to five years. Form and Instructions (PDF).

High-Technology Investment Tax Credit

The credit is based on the adjusted basis of eligible equipment. Limitations: the credit is based on the adjusted basis of eligible equipment and is limited to high-tech equipment purchased (or leased) by businesses engaged primarily in high-tech activities. The credit cannot reduce tax to an amount below the previous year’s tax after credits. The credit cannot be carried back, but can be carried forward for up to five years. Form and Instructions (PDF).

Sales Tax Exemptions

Maine state sales tax exemptions are available for manufacturing, R&D, custom computer programming, fuel & electricity, and biotechnology.

Manufacturing

Sales of machinery and equipment used by the purchaser directly and primarily in the production of tangible personal property for later sale or use is eligible for a sales tax exemption. In addition, items consumed or destroyed directly or primarily in production, and repair and replacement parts for qualified production equipment are exempt from sales tax. Also, any manufacturer is exempt from paying 95% of the sales tax on fuel and/or electricity used in the manufacturing facility.

Research and Development

Sales of machinery and equipment used by the purchaser directly and exclusively in research and development is eligible for a sales tax exemption.

Custom Computer Programming

Any custom computer programming purchased by a business is exempt from sales tax. If a standard program is purchased, then customized, the cost of the standard program would be taxable and the customizing, if separately stated, would be nontaxable.

Fuel & Electricity For Use In Manufacturing

Manufacturers are exempt from paying 95% of the sales tax on fuel and/or electricity used in the manufacturing operation.

Biotechnology

Sales of machinery, equipment, instruments and supplies used by the purchaser directly and primarily in a biotechnology application are eligible for a sales tax exemption.