LIVERMORE FALLS — Many nonprofit organizations and churches may not know they should be collecting taxes on their fundraising events.

“It kind of stinks,” said Don Simoneau, past state commander of the American Legion and past commander of George Bunten American Legion Post No. 10.

Simoneau was invited to attend a meeting in October on new taxes that would go into effect this month. He wanted to know how they would affect fundraising activities for the local post.

“It was eye-opening,” Simoneau said. He discovered the post should be charging an 8 percent tax for meals served at the monthly fundraising suppers. Those meals help maintain the post building and fund programs sponsored by the veterans’ group.

When Simoneau asked about requesting a donation instead of a set fee, he was told that would be skirting the law. The tax applies to the value of the meal.

Simoneau was also informed that customers must be given receipts showing the meal tax was charged, either as part of the price of the meal or as a separate fee.

Simoneau said the post had the options of absorbing the roughly $40 tax due from every supper or adding the tax to the meal price. The post bought a cash register and began charging the meal tax and giving out receipts.

“I have been getting hammered by attendees,” Simoneau said. Many are elderly who live on fixed incomes.

Some groups, such as the VFW, absorb the tax in the cost of the meal.

David Heidrich, director of communications for the Department of Administrative and Financial Services, said the law is not new. A specific exemption for the American Legion Auxiliary was passed in 2001.

“The issues at hand are tax-exempt, nonprofit 501(c)(3) status and a state-based exemption from sales and use taxes,” Heidrich said. “Tax-exempt 501(c)(3) status is granted by the Internal Revenue Service. The state of Maine and Maine Revenue Services does not grant tax-exempt status to organizations based or operating within Maine.” 

Heidrich said those hosting casual, infrequent sales or meals would not have to collect taxes. Any group that hosts a weekly or monthly event is supposed to collect taxes.

“Many nonprofit organizations pay sales and use tax,” he said. “Unless exempted from Maine’s sales-tax law, these organizations must collect and remit sales tax on taxable sales.”

Although purchases are exempt, churches and houses of religious worship are required to collect and remit sales tax on regular sales or meals. Taxes wouldn’t have to be collected on an isolated, annual yard sale or a yearly dinner, he said.

“However, if a church is regularly engaging in sales over the course of the given year, they should be collecting and remitting sales tax to the state of Maine,” he said.

American Legion auxiliaries are exempt from the meal tax when certain conditions are met.

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Sen. Saviello vows to change law

Sen. Thomas Saviello, R-Wilton, said the law requiring nonprofits and churches to collect meal and sales tax is “ridiculous.”

He vowed to eliminate or change the law.

“The law makes no sense when churches and nonprofits are struggling to keep their heads above water,” he said.

Senate President Michael Thibodeau, R-Winterport, said Friday he will work with other legislators to address the situation in the current session.

“Taxing strong civic organizations that raise money to help the needy and are the cornerstones of our communities is not good tax policy,” he said.