Entities Subject to Tax
Maine imposes a corporate income tax on C corporations that have nexus with the state and Maine net income. A corporation has nexus with Maine if it is organized or commercially domiciled in the state, or if it is organized or domiciled outside Maine and exceeds any of the following factor-presence thresholds: (1) property in Maine exceeding $250,000; (2) payroll in Maine exceeding $250,000; (3) sales in Maine exceeding $500,000; or (4) 25% of the corporation's total property, payroll, or sales.
Source: 36 M.R.S. § 5200-B
The nexus thresholds apply to tax years beginning on or after January 1, 2022, establishing objective economic-nexus standards. Federal Public Law 86-272 protections apply — a corporation that comes under the protection of 15 U.S.C. §§ 381–384 is not subject to Maine corporate income tax solely because it exceeds the factor-presence thresholds.
Source: 36 M.R.S. § 5200-B(4)
## S Corporations
S corporations are generally not subject to Maine corporate income tax. However, an S corporation must file Form 1120ME if it has federal taxable income at the corporate level under Internal Revenue Code sections 1374 (built-in gains tax) or 1375 (excess passive investment income tax). For these limited purposes, "Maine net income" means the amount taxable at the federal corporate level.
Source: 36 M.R.S. § 5102(8)
Source: Maine Revenue Services Corporate Income Tax FAQ
## Exclusions
The following entities are not subject to Maine corporate income tax:
- Insurance companies subject to Maine's insurance premiums tax under 36 M.R.S. ch. 357
- Financial institutions subject to Maine's franchise tax under 36 M.R.S. ch. 819
- Tax-exempt organizations under the Internal Revenue Code, except with respect to unrelated business taxable income reported on federal Form 990-T
Source: 36 M.R.S. § 5102(7)
Source: Maine Revenue Services Corporate Income Tax FAQ
Corporations with nexus must file Form 1120ME if they have Maine income and are subject to federal corporate income tax. Limited liability companies (LLCs) taxed as C corporations for federal purposes are also subject to Maine corporate income tax.
Corporate Income Tax Rates
Maine imposes a graduated corporate income tax on a corporation's Maine net income, with four brackets and rates ranging from 3.5% to 8.93%. The graduated rate structure has been in effect for tax years beginning on or after January 1, 2018 under 36 M.R.S. § 5200(1-A).
## Rate Brackets
For tax years beginning on or after January 1, 2018, the rates are:
- 3.5% on Maine net income up to $350,000
- 7.93% on Maine net income from $350,000 to $1,050,000
- 8.33% on Maine net income from $1,050,000 to $3,500,000
- 8.93% on Maine net income in excess of $3,500,000
These brackets apply to each taxable corporation and to each group of corporations that derives income from a unitary business carried on by two or more members of an affiliated group.
Source: 36 M.R.S. § 5200(1-A)
## Application to Unitary Groups
For affiliated groups of corporations engaged in a unitary business, the graduated rates require special allocation rules. The statute provides that "the rates provided in this subsection are applied only to the first $3,500,000 of the net income of the entire group" — meaning the preferential graduated brackets (below the top 8.93% rate) apply to the group's combined net income, not to each member separately.
When unitary group members file separate Maine returns (the default filing method), the benefit of the graduated brackets "must be apportioned equally among the taxable corporations unless those taxable corporations jointly elect a different apportionment." This equal-apportionment rule ensures that each nexus member receives a proportionate share of the lower-bracket benefit based on its apportionment factor. The group may instead jointly elect an alternative allocation of the graduated brackets, subject to a revenue-neutral constraint — any reduction in one member's tax liability from reallocating the preferential rates must result in an equal offsetting increase in another member's liability.
For the full mechanics of how graduated rate brackets are allocated among unitary group members filing separate returns, and the procedures for electing an alternative allocation method, see the section "Allocation of Graduated Rate Brackets Among Unitary Group Members" in this guide.
Source: 36 M.R.S. § 5200(1-A)
Source: 18-125 C.M.R. ch. 810, § .06
Apportionment Formula
Maine apportions corporate income using a single-sales-factor formula. Multistate corporations multiply their net income by a sales factor — a fraction with Maine sales in the numerator and total sales everywhere in the denominator. This single-factor formula applies to all apportionable income and replaced the prior three-factor (property, payroll, and sales) formula effective for tax years beginning on or after January 1, 2007.
Source: 36 M.R.S. § 5211(8)
Allocation of Graduated Rate Brackets Among Unitary Group Members
When an affiliated group of corporations is engaged in a unitary business and files separate Maine corporate income tax returns, the graduated corporate income tax rate brackets are applied to the combined net income of the entire group, and the benefit of those graduated brackets must be allocated among the taxable members. Maine law provides a default equal-apportionment rule but permits the group to elect an alternative allocation method.
## Default Equal Apportionment
For an affiliated group of corporations engaged in a unitary business with activity taxable both within and outside Maine, the graduated rates in 36 M.R.S. § 5200(1-A) are applied only to the first $3,500,000 of the net income of the entire group (not the apportioned income of each member). Under the default rule, the benefit of those graduated brackets "must be apportioned equally among the taxable corporations" that are filing separate returns.
In practice, this means that when the group computes its total Maine tax liability, the graduated rates (3.5% on the first $350,000, 7.93% on income from $350,000 to $1,050,000, and 8.33% on income from $1,050,000 to $3,500,000, with 8.93% on all income in excess of $3,500,000) are applied to the combined net income of the unitary business, and then the resulting "gross tax" is apportioned to each separate member filing a return. Each member applies its own apportionment factor to that gross tax to determine its Maine tax liability.
The equal apportionment default ensures that each nexus member receives a pro-rata share of the benefit of the lower brackets based on its apportionment factor.
## Elective Alternative Allocation
The statute expressly permits the taxable corporations to jointly elect a different apportionment of the graduated rate brackets. The phrase "unless those taxable corporations jointly elect a different apportionment" in 36 M.R.S. § 5200(1-A) authorizes the group to assign the preferential rates in a manner other than equally.
Maine Revenue Services Rule 810 implements this election authority. Under 18-125 C.M.R. ch. 810, § .06, "If an alternate assignment of tax liability is elected by the assignment of the preferential rates provided in 36 M.R.S. § 5200 to a specific member or members, the associated reduction of tax liability must result in an equal increase of tax liability to one or more other members of the unitary group."
This revenue-neutral requirement means that the election to allocate the graduated brackets differently cannot reduce the group's total Maine tax liability — it only reallocates the benefit among members. If one member receives a larger share of the lower-bracket benefit (reducing its tax), one or more other members must absorb an equal offsetting increase.
## How the Election Works
The joint election allows strategic allocation of the graduated rate benefit among members. For example, the group might allocate all of the graduated brackets to the member with the largest Maine apportionment factor, maximizing that member's use of credits or minimizing tax on the member with the lowest effective rate for other purposes. Conversely, if one member has substantial credit carryforwards, the group might assign the preferential rates to other members to preserve the first member's tax base against which to apply credits.
The statute does not specify the form or timing of the election, but the requirement that it be "jointly" made by "those taxable corporations" indicates that all nexus members filing separate returns must consent to the alternative allocation. The election is implemented when the group files its separate returns and combined report (Form CR) showing the alternative allocation of tax liability.
## Interaction with Single-Return Filing
The allocation rule applies when members of a unitary group file separate Maine returns. If the State Tax Assessor allows two or more taxable unitary members to file a single return reporting the group's aggregate Maine tax liability under 36 M.R.S. § 5220(5), the graduated rates are simply applied once to the group's combined apportioned income, and there is no need to allocate brackets among members — the single return reports one tax amount for the group.
The separate-return allocation issue arises only when each nexus member files its own Form 1120ME (the typical case under Maine's combined-reporting regime).
## Effective Date and Current Law
The graduated rate bracket allocation rules in 36 M.R.S. § 5200(1-A) apply to tax years beginning on or after January 1, 2018. Prior to 2018, a similar structure existed under § 5200(1) (repealed) with lower income thresholds ($250,000 rather than $3,500,000 for the top of the graduated brackets). The same equal-apportionment-unless-jointly-elected framework applied under the pre-2018 law.
Source: 36 M.R.S. § 5200(1-A)
Source: 18-125 C.M.R. ch. 810, § .06
Tax Base and Federal Conformity
Maine corporate income tax starts with federal taxable income. "Maine net income" is defined as a corporation's federal taxable income, as modified by additions and subtractions under 36 M.R.S. § 5200-A, and apportioned to Maine under chapter 821. Maine uses static conformity to the Internal Revenue Code: it adopts the IRC "as of December 31, 2024" per 36 M.R.S. § 111(1-A), meaning subsequent federal tax law changes do not apply until Maine enacts conformity legislation. Practitioners should verify the current conformity date, as the legislature updates it periodically.
Source: 36 M.R.S. § 5102(8)
Source: 36 M.R.S. § 111(1-A)
Filing Due Date and Extensions
Maine corporate income tax returns must be filed on or before the same date the federal corporate income tax return is due, without regard to any federal extension. Under 36 M.R.S. § 5227, "the income tax return required by this Part must be filed on or before the date a federal income tax return, without regard to extension, is due to be filed." For calendar-year C corporations filing for tax years beginning after December 31, 2015, the federal due date under Internal Revenue Code § 6072(b) is the fifteenth day of the fourth month following the close of the tax year — April 15 for calendar-year filers. Fiscal-year filers follow the same rule: the Maine return is due on the fifteenth day of the fourth month after the fiscal year ends.
## Automatic Extension
Maine grants an automatic extension of time to file when a corporation is granted a federal extension. Under 36 M.R.S. § 5231(1-A), when a taxable corporation is granted a federal extension of time to file its federal return, "an extension to file the taxpayer's income tax return with respect to the tax imposed by this Part is automatically granted for an equivalent period from the date prescribed for filing the return plus 30 days."
This means:
- No separate Maine extension request is required. Maine Revenue Services does not require corporations to file a separate extension form or written request to obtain the Maine extension. The federal extension automatically extends the Maine filing deadline.
- Duration: The Maine extension runs for the same period as the federal extension, plus 30 days. For a corporation that obtains a six-month federal extension under IRC § 6081(a) by filing federal Form 7004, the Maine due date is extended to the federal extended due date plus 30 days. The Maine automatic extension following a federal extension is not subject to the general eight-month cap stated in § 5231(1) — the "plus 30 days" rule in subsection (1-A) governs corporations that obtain federal extensions.
- Federal extension form requirement. A corporation must have obtained a valid federal extension (typically by filing IRS Form 7004 by the original due date) in order for the Maine automatic extension to apply. The Maine automatic extension follows the federal extension; it does not create a standalone Maine extension right.
## Extension Is for Filing Only — Not for Payment
The extension of time to file is not an extension of time to pay. Under 36 M.R.S. § 5231(3), "A taxpayer granted an extension of time for filing a return under subsection 1 or 1-A that files the return during the period of extension and that remits the amount of the balance due with that return will not incur a failure-to-pay penalty imposed by section 187-B, subsection 2 unless the amount remitted with the return is more than 10% of the total tax liability shown on the return."
This statutory safe harbor means that if at least 90% of the Maine corporate income tax liability is paid by the original due date (typically through estimated tax payments or a payment submitted with an extension request), and the remaining balance (not more than 10% of the total) is paid with the extended return, no late-payment penalty under § 187-B(2) is imposed.
Interest accrues on any unpaid balance from the original due date, even during a valid extension period. The extension eliminates the failure-to-file penalty but does not stop interest from running on unpaid tax.
Source: 36 M.R.S. § 5227 (Time for filing returns)
Source: 36 M.R.S. § 5231 (Extension of time for filing and payment)
Additions and Subtractions to Federal Taxable Income
Maine corporate income tax starts with federal taxable income and then applies Maine-specific modifications to arrive at Maine net income. These modifications — additions and subtractions — are governed by 36 M.R.S. § 5200-A and are reported on Form 1120ME Schedules 1A (additions) and 1S (subtractions).
## Common Addition Modifications
Corporations must add back to federal taxable income:
Income taxes. Maine does not allow a deduction for income taxes imposed by Maine or any other state. Any state income tax deduction claimed on the federal return must be added back. 36 M.R.S. § 5200-A(1)(A).
Interest from non-Maine state and municipal bonds. Interest from obligations of states other than Maine, and their political subdivisions, must be added to federal taxable income even though it is excluded from federal gross income. 36 M.R.S. § 5200-A(1)(B).
Federal international tax deductions. Maine requires add-backs for the participation exemption deduction under IRC § 245A(a), the foreign-derived intangible income (FDII) deduction under IRC § 250(a)(1)(A), and the global intangible low-taxed income (GILTI) deduction under IRC § 250(a)(1)(B). 36 M.R.S. § 5200-A(1)(DD), (EE), (FF).
Bonus depreciation add-back. Maine requires taxpayers to add back the net increase in depreciation attributable to federal bonus depreciation under IRC § 168(k) for property placed in service on or after January 1, 2008. The add-back is calculated by comparing actual federal depreciation (including bonus depreciation) to what depreciation would have been without claiming IRC § 168(k). This add-back is recaptured over the life of the asset through corresponding subtraction modifications in future years. 36 M.R.S. § 5200-A(1)(T), (AA), (BB), (CC).
Net operating loss adjustments. Maine requires add-backs for federal NOL carrybacks and federal NOL carryforwards that offset Maine addition modifications in the loss year. 36 M.R.S. § 5200-A(1)(B), (C), (H).
Losses from financial institution pass-through ownership. All financial institutions are subject to Maine's franchise tax under 36 M.R.S. ch. 819, regardless of organizational structure. A corporation owning an interest in a partnership, LLC, S corporation, or disregarded entity that is a financial institution must add back any loss, expense, or deduction from that ownership interest. 36 M.R.S. § 5200-A(1)(X).
## Common Subtraction Modifications
Corporations may subtract from federal taxable income:
Interest on U.S. obligations. To the extent included in federal taxable income, corporations may subtract interest on U.S. bonds, U.S. Treasury notes, and other obligations of the U.S. government that are exempt from state taxation under federal law. 36 M.R.S. § 5200-A(2)(A).
Foreign dividend gross-up. The amount included in federal gross income under IRC § 78 (foreign dividend gross-up) may be subtracted. 36 M.R.S. § 5200-A(2)(B).
Subpart F income — 50% deduction. Corporations may deduct an amount equal to 50% of apportionable subpart F income (as defined in IRC § 952), net of related expenses, that was included in federal gross income. Any amount subtracted under this provision must be excluded from the sales factor used for apportionment. 36 M.R.S. § 5200-A(2)(CC).
Bonus depreciation recapture. For property on which an addition modification was made for bonus depreciation in a prior year, taxpayers may claim a subtraction equal to the net increase in depreciation that would have been allowable without IRC § 168(k). The total subtraction over all years cannot exceed the original addition modification. Upon disposition of the property, gain or loss must be adjusted for Maine tax purposes by the difference between the addition modification and the subtraction modifications allowed. 36 M.R.S. § 5200-A(2)(R), (S), (T), (V), (Y), (Z), (DD), (EE).
Net operating loss recapture. For NOLs where an addition modification was required (to reverse federal NOL carrybacks), taxpayers may claim a subtraction in subsequent years within the allowable federal carryforward period, subject to limitations. The subtraction cannot reduce Maine taxable income below zero and cannot have been previously used. 36 M.R.S. § 5200-A(2)(H).
Cannabis business expenses. For tax years beginning on or after January 1, 2023, businesses operating as registered caregivers, registered dispensaries, manufacturing facilities, cannabis establishments, or testing facilities may deduct business expenses that are disallowed under IRC § 280E. 36 M.R.S. § 5200-A(2)(BB).
## Calculation and Compliance
The calculation flow is: Federal taxable income minus subtraction modifications (Schedule 1S, line 23) plus addition modifications (Schedule 1A, line 12) equals adjusted federal taxable income. Adjusted federal taxable income is then apportioned (if the taxpayer has multistate operations) and the tax is computed on that amount.
Taxpayers must maintain documentation supporting each modification, including pro forma depreciation schedules for bonus depreciation add-backs and federal Forms 4562. Schedule X is required when filing amended returns to explain changes in modifications.
Source: 36 M.R.S. § 5200-A
Combined Reporting for Unitary Businesses
Maine requires combined reporting when an affiliated group of corporations is engaged in a unitary business and at least one member has Maine nexus. Combined reporting is mandatory, not elective — if the statutory requirements are met, the group must file a combined report.
## Filing Requirements
A taxable corporation that is a member of an affiliated group engaged in a unitary business with one or more other members "shall file, in addition, a combined report, in accordance with section 5244." Each member with Maine nexus files its own separate Form 1120ME, and the combined report (Form CR) must be attached to each separate return. The combined report provides the basis for determining the taxable income and Maine net income of the entire unitary business under U.S. federal law as modified by Maine.
The State Tax Assessor may allow (but is not required to permit) two or more unitary members to file a single consolidated return "on which the aggregate Maine income tax liability of all those corporations is reported." This single-return option requires assessor approval; absent such approval, each nexus member files a separate return based on the combined report.
## Definitions
Affiliated group means "a group of 2 or more corporations in which more than 50 percent of the voting stock of each member corporation is directly or indirectly owned by a common owner or owners, either corporate or non-corporate, or by one or more of the member corporations."
Unitary business means "a business activity which is characterized by unity of ownership, functional integration, centralization of management and economies of scale."
## Combined Report Contents
The combined report must include, "both in the aggregate and by corporation, a list of the federal taxable income, the modifications provided by section 5200-A, the sales in Maine and everywhere as defined in chapter 821 and the Maine net income of the unitary business." Only corporations required to file a federal income tax return may be included; "neither the income nor the sales of a corporation that is not required to file a federal income tax return may be included in the combined report." This water's-edge limitation excludes foreign entities that do not file U.S. federal returns, confining the combined group to entities included in or required to file a U.S. return.
Intercompany eliminations are made as necessary to avoid duplication of income or sales.
## Calculation of Tax — Separate Returns (Default)
When separate returns are filed (the default absent assessor approval of a single return), each unitary member with Maine nexus determines its Maine tax liability as follows:
- Combined net income is calculated for the entire unitary business — the aggregate federal taxable income of all included members, adjusted by Maine modifications under § 5200-A.
- Apportionment factor for each separate member: The numerator is that member's Maine sales plus the member's proportionate share of Maine sales attributable to non-nexus entities in the group; the denominator is total sales everywhere of all members of the unitary business. Maine uses a single-sales-factor apportionment formula.
- Tax calculation: Each member applies Maine's graduated corporate income tax rates (3.5% to 8.93% under § 5200) to its apportioned share of the combined net income. The sum of the separate members' tax liabilities must equal the total Maine tax that would have been imposed if a single return had been filed.
## Calculation of Tax — Single Return (Assessor-Approved)
If the assessor allows a single return, the group calculates one combined apportionment factor (Maine sales of all nexus members ÷ total sales everywhere of all members), applies that factor to the combined net income, and reports one aggregate Maine tax liability for the group.
Source: 36 M.R.S. § 5220(5)
Source: 36 M.R.S. § 5244
Source: 36 M.R.S. § 5102(1-B) (affiliated group), § 5102(10-A) (unitary business)
Minimum Tax — No Current Requirement
Maine does not impose a minimum corporate income tax. A corporation with zero or negative Maine net income after apportionment has zero Maine corporate income tax liability — there is no fixed-dollar floor or minimum payment required simply by virtue of doing business in the state or filing a return.
## No Flat Minimum Tax
Unlike some states that impose an annual minimum tax regardless of income (for example, California's $800 minimum franchise tax for C corporations), Maine has never enacted such a requirement. The Maine corporate income tax under 36 M.R.S. § 5200 is calculated solely by applying graduated rates (3.5% to 8.93%) to Maine net income. If a corporation's Maine net income is zero or negative, the tax liability is zero. There is no separate minimum tax, floor tax, or privilege tax that applies to regular C corporations doing business in Maine.
Distinction from Secretary of State fees. Corporations formed or registered in Maine must file an annual report with the Maine Secretary of State by June 1 each year and pay an annual report filing fee of $85 (domestic corporations) or $150 (foreign corporations). This fee is a corporate compliance filing obligation, not a tax administered by Maine Revenue Services, and it does not constitute a minimum corporate income tax. The annual report fee applies regardless of whether the corporation has Maine income tax liability.
Source: Maine Secretary of State — Annual Reports
Distinction from financial institution franchise tax. Maine imposes a franchise tax on financial institutions under 36 M.R.S. ch. 819, which is a separate tax regime that applies only to banks, credit unions (except federally chartered credit unions), financial institution holding companies, and similar entities. Regular C corporations that are not financial institutions are not subject to Maine's franchise tax and instead pay corporate income tax under Part 8 (36 M.R.S. ch. 817). The franchise tax is a distinct tax with its own base and rate structure; it is not a minimum tax applicable to all corporations.
Source: 36 M.R.S. ch. 819 (Franchise Tax on Financial Institutions)
## Alternative Minimum Tax — Repealed for Corporations
Maine formerly imposed an alternative minimum tax (AMT) on corporations in addition to the regular corporate income tax, but this tax no longer applies to corporations for tax years beginning on or after January 1, 2018.
Historical AMT framework (through 2017). For tax years beginning before January 1, 2018, Maine imposed an AMT on taxable corporations required to file an income tax return under Part 8, excluding financial institutions subject to the franchise tax and persons not subject to the federal AMT under Internal Revenue Code Section 55(e). The Maine corporate AMT applied when a corporation's tentative minimum tax exceeded its regular Maine corporate income tax.
The Maine corporate AMT was calculated as follows:
- Tentative alternative minimum taxable income began with federal alternative minimum taxable income (federal Form 4626, line 7).
- Maine modifications were applied — the tentative AMTI was reduced by income, loss, or deductions that Maine uses to decrease federal taxable income under 36 M.R.S. § 5200-A (to the extent included in federal AMTI), and increased by income, loss, or deductions that Maine uses to increase federal taxable income under § 5200-A (to the extent not included in federal AMTI).
- Exemption amount was subtracted — the applicable exemption under Internal Revenue Code Section 55(d) as of December 31, 2002, subject to phase-out.
- Apportionment factor was applied for multistate corporations — the result was multiplied by the single-sales-factor fraction under 36 M.R.S. § 5211(8) to produce alternative minimum taxable income.
- Tentative minimum tax was computed by multiplying alternative minimum taxable income by 5.4%.
- AMT liability was the excess of tentative minimum tax over the regular Maine corporate income tax.
Corporations that paid Maine AMT in prior years could carry forward a minimum tax credit to offset regular tax liability in subsequent years to the extent regular tax exceeded tentative minimum tax. This credit mechanism prevented permanent double taxation.
Current law (2018 forward). The corporate alternative minimum tax was repealed effective for tax years beginning on or after January 1, 2018. Maine now imposes only the regular graduated corporate income tax under 36 M.R.S. § 5200, with no alternative minimum tax and no fixed-dollar minimum tax floor.
Corporations that paid Maine AMT in tax years before 2018 and have unused minimum tax credit carryforwards may still use those credits against regular tax in post-2017 years, subject to the limitations in 36 M.R.S. § 5203-C(4). The 2024 Form 1120ME instructions reference Schedule C, Worksheet for Minimum Tax Credit, for corporations with carryforward credits from pre-2018 tax years.
Market-Based Sourcing of Sales of Services and Intangible Property
Maine employs market-based sourcing for receipts from sales of services and intangible property. These sourcing rules govern how receipts other than sales of tangible personal property are assigned to Maine for purposes of the single-sales-factor apportionment formula. Maine enacted its own market-based sourcing methodology under 36 M.R.S. § 5211(16-A), which became effective for tax years beginning on or after January 1, 2007 — the same date Maine switched from a three-factor formula to a single-sales-factor formula.
## Sourcing of Services
Receipts from the performance of services are attributed to the state where the services are received. This "market" approach looks to where the customer receives the benefit of the service, not where the taxpayer performs the work (which would be a cost-of-performance approach).
Hierarchy of determination. When the state where services are received is not readily determinable, Maine applies a cascading set of fallback rules:
- Primary rule: Attribute receipts to the state where the services are received.
- First fallback: If the state where services are received cannot be readily determined, the services are deemed to be received at the home of the customer (for individuals) or the office of the customer from which the services were ordered in the regular course of the customer's trade or business (for business customers).
- Second fallback: If the ordering location cannot be determined, the services are deemed to be received at the home or office of the customer to which the services are billed.
Federal government exception. When the purchaser of the service is the federal government, receipts are attributed to Maine if a greater proportion of the income-producing activity is performed in Maine than in any other state, based on costs of performance. This exception applies only to federal government sales, not to sales to other customers.
Source: 36 M.R.S. § 5211(16-A)(A)
## Sourcing of Intangible Property
Receipts from the license, sale, or other disposition of patents, copyrights, trademarks, or similar items of intangible personal property are attributed to Maine if the intangible property is used in Maine by the licensee (or purchaser). This market-based rule assigns receipts to the state where the customer exploits the intangible, not where the taxpayer developed it or where the licensing agreement was signed.
Multi-state use. If the intangible personal property is used by the licensee (or purchaser) in more than one state, the income must be apportioned to Maine according to the portion of use in Maine. The statute does not prescribe a specific method for measuring "portion of use" — taxpayers must develop a reasonable approach based on the nature of the intangible and the customer's business. Common approaches include apportioning by the licensee's sales factor, the licensee's employee headcount, or the geographic distribution of the licensee's use of the licensed rights.
Federal government exception. When the purchaser or licensee of the intangible personal property is the federal government, receipts are attributable to Maine if a greater proportion of the income-producing activity is performed in Maine than in any other state, based on costs of performance. This exception parallels the services rule for federal sales.
Source: 36 M.R.S. § 5211(16-A)(B)
## Other Sales
Subsection 16-A also addresses sourcing of other sales types:
Real property: Receipts from the sale, lease, rental, or other use of real property are sourced to Maine if the real property is located in Maine. 36 M.R.S. § 5211(16-A)(C).
Partnership interests: Receipts from the sale of a partnership interest are sourced to Maine in an amount equal to the gross receipts multiplied by the ratio of the original cost of partnership tangible property located in Maine to the original cost of partnership tangible property everywhere, determined at the time of sale. If more than 50% of the partnership's assets consist of intangible property, the receipts are sourced according to the partnership's sales factor for its first full tax period immediately preceding the sale. 36 M.R.S. § 5211(16-A)(F).
## Relationship to MTC Model Rules
Maine's market-based sourcing rules in § 5211(16-A) are not a direct adoption of the Multistate Tax Commission's model apportionment rules. Maine drafted its own sourcing statute, which is codified in state law rather than incorporated by reference to an MTC model. However, the structure and policy of Maine's rules are generally consistent with the MTC's market-based sourcing approach: both look to where the customer receives the benefit (the "market" state) rather than where the seller performs the work (the "cost-of-performance" state).
The MTC adopted revised market-based sourcing provisions in its Multistate Tax Compact Article IV in 2014 and issued implementing regulations (the "General Allocation and Apportionment Regulations" or GAARs) in 2017. Maine's statute predates these MTC revisions — Maine enacted § 5211(16-A) in 2007. While Maine's approach is philosophically aligned with the MTC's market-sourcing framework, practitioners should apply Maine's own statutory language and should not assume that MTC commentary or examples automatically apply to Maine.
Implementing regulation. Maine Revenue Services has adopted Rule 801 (18-125 C.M.R. ch. 801), which provides additional detail on sales-factor sourcing, including examples illustrating the "services are received" standard for various service categories. Rule 801 implements the statutory framework in § 5211 and is the authoritative regulatory guidance on Maine's market-based sourcing methodology.
Source: 18-125 C.M.R. ch. 801