LD 1481 fuel sales tax exemption bill tabled

The Maine Legislature’s Taxation Committee voted unanimously Feb. 3 to table action on LD 1481, An Act To Protect Maine’s Natural Resources Jobs by Exempting from Sales Tax Petroleum Products Used in Commercial Farming, Fishing and Forestry, for three weeks.

Maine Sen. Paul Davis, R-District 4, the bill’s sponsor, requested the delay in order to continue ongoing discussions with the LePage Administration about how to fund the tax cut.

The bill is designed to provide relief to industries including professional loggers by exempting them from sales tax on fuel – including off-road diesel – and petroleum products used in commercial wood harvesting.

The Professional Logging Contractors of Maine (PLC) made strong arguments Jan. 20 before the Taxation Committee in support of the bill, with testimony provided by PLC Members who urged the committee to support it to aid the hard-pressed Maine forest products industry, particularly loggers, who have been hit with a series of losses including paper mill and biomass mill closures that are cutting into their markets and imperiling their future.

PLC Executive Director Dana Doran explained to committee members that recent lower fuel prices at the pump do not necessarily translate to significant savings for loggers, nor do they provide any assurances for the future; increased petroleum prices have added exponential cost to operating equipment, tires, parts, lubricants and anything manufactured with petroleum, and none of these commodities lowers their prices when pump prices decrease.

In addition, decreased markets in the past six months have led to lower prices being paid to logging contractors so the decrease in fuel has not led to increases in profit as many would expect.

Loggers outlined the many challenges facing their businesses including steadily increasing costs and the loss of traditional markets, and called for legislators to look to the example of other states that have approved similar sales tax exemptions as a way to provide relief to important industries.

Loggers also pointed out that the majority of the fuel they use in their timber harvesting operations is used off-road or on woods roads they construct themselves, and so the traditional argument for a fuel tax – to support state infrastructure – does not apply.

A recent survey by the PLC which drew responses from approximately 80 percent of its members, calculated that those members used 7.6 million gallons of off-road diesel over the course of the past year, showing how important the sales tax exemption could be to their profitability should it pass.

The bill has drawn support from other groups including representatives of the Maine Farm Bureau and Sappi Fine Paper – whose representative noted paper mills and other consumers of wood fiber depend on a healthy logging industry to survive.

LD1481 is tentatively scheduled to go before the Taxation Committee in a work session February 24th. To track the bill and scheduling click here.

UPDATE – The Taxation Committee voted unanimously Feb. 24 “ought to pass” on an amended version of the bill exempting fuel from sales tax but not lubrcants. The bill must now pass the Maine House and Senate and eventually be funded by the Appropriations Committee. As amended it has been designated an emergency measure with an effective start date of July 1.