Cupidity, hypocrisy, or stupidity?

The Legislature, dozing on the banks of the Kennebec, apparently pays very little heed to the rhetoric of Governor Baldacci. His mouthings about the worth of entrepreneurship and the importance of small business to the economic health of the state have been rendered irrelevant by an extraordinary new law. The act strips entrepreneurs who do less than $10,000 in business in a year of their resale certificates. These are the certificates which allow businesses to purchase things which they will resell without paying sales tax.

The ostensible reason for this huge policy change is “to prevent against resale fraud and further loss in tax revenues.” The Maine Revenue Web site claims, “Fraudulent use of resale certificates costs the State of Maine millions of dollars each year in lost tax revenues.” We would really like to see some evidence for that assertion.

The justification continues, “Maine has established new resale certificate procedures that will help to ensure only legitimate retailers are avoiding payment of tax on items intended for resale. Effective July 30, 2004, only active registered retailers that have more than $10,000 in annual gross sales will be acknowledged for the resale exemption.”

So, “all existing resale certificates [will] expire on August 15, 2004.” Of course you still have to hang on to everything for six years. The State has magnanimously allowed that the small crafter, for example, will be able to keep track of every bead or square of cloth used in the creation of a belt or a quilt and ultimately receive a credit on their sales tax submissions. But what an extraordinarily onerous obligation this end-around tax increase creates for people who are already knee-deep in government paper.

We call it a tax increase because micro businesses will now be paying sales tax which they hadn’t had to previously. The odds seem to us very long indeed that the cottage business proprietors will find it so overwhelming to keep track of the tax paid for every component of their products in order to do masses of arithmetic for an eventual credit that many will simply not bother. They may raise their prices instead. Therefore the state will be collecting taxes which it says can be reclaimed by a credit with a pretty fair chance that in many cases it won’t have to issue that credit.

In addition, many suppliers will not sell wholesale to purchasers who lack a reseller’s certificate. The State says it will find a way around this problem, but we are not holding our breath. Finally, we would suggest that for the state to discriminate against small business in this fashion puts the lie to any claim that they value the contribution of the little guy to the community’s economic life.

To its credit the Maine Revenue Service will be offering workshops to explain the new rules. On Tuesday, July 20 a workshop will be held at the Hutchinson Center in Belfast from 9 to 11 a.m. Also on July 20, Rockland’s Trade Winds will be the site for a 1 to 3 p.m. workshop. And the Atrium in Brunswick will host a workshop on Wednesday, July 21 from 9 to 11 a.m.

However, despite whatever smiley face these workshops manage to paint on a particularly short sighted policy change, the plain fact remains that Maine’s national reputation and ranking as a truly lousy place to do business will remain intact. Perhaps it will even be enhanced. Hey, nice going.