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Maine Revenue Services (MRS) announced that, continuing through 2021, it will not consider the presence of one or more employees in the state, who commenced working remotely from Maine during the state of emergency and due to the COVID-19 emergency, to constitute substantial physical presence for Maine sales and use tax registration and collection duty purposes. MRS had previously announced this nexus relief would be available through 2020.

MRS also confirmed that the statutory residence requirements for income tax purposes remain unchanged, even during COVID-19. A statutory resident is an individual who maintained a permanent place of abode in Maine for the entire tax year and spent more than 183 days of the year in the state (unless the individual is in the U.S. Armed Forces). A place of abode is not considered permanent if it is only maintained during a temporary stay in Maine for the accomplishment of a particular purpose. An individual who is domiciled outside of Maine but maintains a second home in Maine at which they stay during part of the year would not meet this exception, even during COVID-19. (Maine Tax Alert, Vol. 31, Issue 3.)

Resident income tax withholding

In 2020, MRS stated that Maine income tax withholding for wages paid to a Maine resident suddenly working in Maine due to a state's COVID-19 state of emergency will continue to be calculated as if the Maine resident were still working outside the state under the rules set forth in MRS Rule 803, Section .04(B). (Maine Tax Alert Vol. 30, Issue 19.)

Maine income tax and income tax withholding apply to all wages paid to Maine residents regardless of the state where the wages were earned. A reduction to Maine resident income tax withholding is allowed for any income tax withheld under the laws, rules or regulations of the nonresident state for the applicable payroll period. (See EY Tax Alert 2020-2567.)

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