When does Maine’s new sales tax on digital services begin?

The new sales tax on digital audiovisual and audio services in Maine begins on January 1, 2026.

Which digital services are now taxable in Maine?

Digital streaming services such as Netflix, Spotify, and Hulu are now taxable under the sales and use tax in Maine starting in 2026.

What is the new tax rate for digital services in Maine?

The applicable sales and use tax rate for digital services in Maine is 5.5%.

What happened to the Service Provider Tax in Maine?

Maine has repealed the Service Provider Tax. Services that were previously taxed under it, such as cable and satellite TV, are now taxed under the general sales tax.

Why is Maine expanding its sales tax base?

Maine is expanding its sales tax base to increase state revenue and ensure more consistent income from the growing digital services sector.

What types of services are now included in Maine's taxable base?

In addition to digital audio and video, the taxable base now includes accommodation rentals, electricity transmission and distribution, fabrication services, and prepaid calling services.

Maine Expands Sales Tax to Streaming and Digital Services

The US State of Maine announced its comprehensive state Budget Bill for the State Government’s operations for fiscal years ending June 30, 2025, 2026, and 2027. The Bill, which covers a broad range of budgetary matters, also includes changes to sales and use tax and service provider tax, adding digital audiovisual and digital audio services to the list of taxable services under the sales tax.

Impact on Digital Services Providers

Under Part G of the budget Bill, Maine broadened the tax base. Moreover, the Bill merged the newly included digital audiovisual and digital audio services with the related digital services and products previously taxed.

As stated in the Bill, the electronic transfer of digital audiovisual and digital audio works to an end user with the right of less than permanent use granted by the seller, including when conditioned upon continued payment from the purchaser or a subscription, is now subject to tax. In other words, starting January 1, 2026, streaming services, such as Netflix, Spotify, or Hulu, are subject to a 5.5% sales and use tax.

In addition to this, the Bill also repeals the Service Provider Tax, previously applicable to taxable services like cable, satellite TV, and radio. Consequently, these services will become subject to the general sales tax base at the same 5.5% rate.

Following the decision to broaden the tax base, the list of taxable services now includes, in addition to digital audio and audiovisual services, accommodation rental, transmission and distribution of electricity, ancillary services, fabrication services, the sale of prepaid calling services, and a few other services.

Conclusion

The decision to broaden the tax base and include digital and streaming services in the list of taxable services is a means to collect more revenue and ensure more income for the state budget. Nevertheless, taxable persons operating in this sector, previously not subject to sales and use tax, must carefully consider when they must start collecting and remitting taxes and ensure that they apply the correct tax rate.

Source: Bill L.D. 210