Sales tax exemption veto draws local catcalls
BRUNSWICK — A veto announced Thursday by Gov. Paul LePage denies Maine’s nonprofit performing arts organizations exemption from sales tax, which hits Brunswick harder than much of the state.
In the case of the Bowdoin International Music Festival, the veto means $12,000 in sales tax it would not have paid with the governor’s signature on LD 205, according to music festival’s executive director, Peter Simmons.
That high level of tax is uncommon for arts organizations, Simmons said. But Brunswick has an uncommon grouping of performing arts organizations in the state.
Maine State Music Theatre (MSMT) executive director Steve Peterson said his organization is now working to overturn the governor’s veto, a feat that would require two-thirds of the state Senate’s support.
“I think the governor’s stance on this is disappointing at a time when arts organizations are struggling to exist,” Peterson said.
MSMT pays around $16,000 annually in state sales tax, Peterson said.
Combined sales tax paid by the two Brunswick organizations makes up more than half of the total sales tax generated by performing arts nonprofit groups statewide.
“We’re two of the largest (performing arts nonprofits) in the state,” Peterson said.
A fiscal note attached to LD 205, which state Sen. Stan Gerzofsky sponsored, estimates total loss of state revenue if nonprofit performing arts organizations were exempt from sales tax at around $45,000 annually.
During the bill’s formation, both organizations lobbied strongly with Gerzofsky for the tax break that they say intended to put performing arts nonprofit organizations on par with other nonprofits — such as summer camps and museums — in terms of sales tax exemptions.
While the Bowdoin International Music Festival pays tax on lodging for its students on campus, Simmons said, other educational summer camps at Bowdoin College and around the state do not, which he said years ago he thought was merely an oversight.
When the sales tax exemption was created for certain nonprofits, Simmons said, “performing arts organizations were not included and I can only speculate that it was because there wasn’t someone at the table representing that interest.”
Simmons said that most of his organization’s tax costs — around $10,000 — come from paying room and board for students who arrive at Bowdoin College’s campus for the annual music festival.
Simmons said he approached Gerzofsky years ago about the legislation that eventually made it to the floor of the Legislature during the 2011 session.
“It was an attempt to level the playing field for our organizations,” Simmons said.
Along with the veto of LD 205, LePage also vetoed bills by Sen. Troy Jackson, D-Allagash, and Sen. Phil Bartlett, D-Gorham, that dealt, respectively, with tax credits for logging companies that hire Maine residents and energy efficiency.
In a letter to the Legislature regarding the performing arts veto, LePage wrote, “Performing arts organizations are important to the cultural fabric of Maine. However, simply because something is good does not mean it should enjoy tax-free status.”
Adrienne Bennett, spokeswoman for the governor, told The Times Record on Friday that his tax cuts will focus on senior citizens and “job creators.”
In his letter, LePage wrote that he strongly supports tax relief, but it “must be in terms of an overall plan.”
“Exemptions from the sales tax should be saved for the necessities of life — food, shelter, medicine — as well as for important initiatives meant to foster growth and create good-paying jobs in Maine industries, increasing our overall tax base,” LePage wrote.
Simmons said he disagrees that his organization does not foster growth.
“Our impact is about $3 million a year in the area and Maine State Music Theatre’s is even larger,” Simmons said.
Peterson said MSMT generates an estimated $5 million locally.
“And it’s not just the money that we bring into the state,” Simmons said. “Most who are involved in our programs as students and performers come into the state and bring that revenue here to spend.”
In the case of MSMT, which has an annual budget of around $3 million, Peterson said that sets, costumes and other production equipment are most often built locally with materials purchased locally.
“We affect and help the businesses that surround us because everything is purchased and built on site,” Peterson said.
Of Thursday’s veto, Peterson said LePage is missing the economic impact of arts statewide.
“I don’t think the governor realizes the impact the arts has in the state and what a major source of business they are for the state,” Peterson said.
For the international music festival, Simmons said that to support annual operations he raises approximately $500,000, and $12,000 of that will continue to go to sales tax he said could otherwise go back into the program.
“For me, it’s a big thing — it’s a lot of money,” Simmons said. “It’s enough for me to provide benefits for one of my employees.”
Or, it might be enough to expand employment, Simmons said.
“We hired a person part time this year who I had considered hiring full time, but I can’t afford it,” Simmons said.
From the state’s perspective, Simmons said he understands working with limited resources.
“The state has a budget problem,” Simmons said. “Every cent counts, but I do think that for the paper industries and other industries — they get multi-million dollar tax breaks, and I think that’s great. It generates or helps business, but I think that we fit in that category, and that’s my real argument.”
Read the full text of LePage's veto letters here: