Maine is a high-tax state by most measures, but small businesses have more room than the headline numbers suggest. The corporate tax starts at a low 3.5% on the first $350,000 of profit before rising to 8.93% for large companies. Individuals pay 5.8% to 7.15%. The 5.5% sales tax is uniform statewide, and most new business equipment is exempt from property tax.
This guide explains Maine's business taxes for 2026, including the new paid family leave premium, with worked examples and comparisons.
Maine business taxes at a glance
For a small corporation in Maine, the first $350,000 of profit is taxed at just 3.5%, one of the lowest small-business corporate rates in New England. Pass-through owners, however, reach the 7.15% top personal rate at a relatively modest income, so most owner-operators earning more than about $65,000 pay 7.15% on each additional dollar. Customers pay 5.5% sales tax with no local add-ons. Payroll costs now include a 1% premium for paid family and medical leave. Formation is relatively expensive at $175, and annual reports cost $85.
Corporate income tax
| Taxable income | Rate |
|---|---|
| $0 to $350,000 | 3.5% |
| $350,000 to $1,050,000 | 7.93% |
| $1,050,000 to $3,500,000 | 8.33% |
| Over $3,500,000 | 8.93% |
- Apportionment: Single sales factor.
- Combined reporting: Required for unitary groups.
- Alternative minimum tax: Maine repealed its corporate AMT.
- Credits: Research expense credit, Seed Capital Tax Credit, Pine Tree Development Zone benefits (now limited) and the Maine Employment Tax Increment Financing program.
- Returns: Form 1120ME is due on the 15th day of the month after the federal due date.
Financial institutions pay a franchise tax instead of the corporate income tax.
Personal income tax and pass-through owners
| Taxable income (single, 2026, indexed) | Rate |
|---|---|
| $0 to about $27,400 | 5.8% |
| About $27,400 to $64,850 | 6.75% |
| Over about $64,850 | 7.15% |
Maine's brackets are indexed to inflation each year. The 7.15% rate starts at a much lower income than top rates in most states, so the effective rate for a business owner earning $150,000 is about 6.8%.
- LLC owners, partners and sole proprietors pay these rates on profit.
- S corporation shareholders pay on their share.
- Nonresident owners pay on Maine-source income, and pass-through entities must withhold for nonresident members.
Sales and use tax
Maine has no local sales taxes, so rates are the same everywhere:
| Item | Rate |
|---|---|
| General sales | 5.5% |
| Prepared food and liquor | 8% |
| Short-term lodging | 9% |
| Short-term auto rentals | 10% |
- Groceries are exempt.
- Services: Maine taxes a short list of services, such as fabrication and some rentals.
- Remote sellers with more than $100,000 of Maine sales must collect.
Payroll and property taxes
- Paid family and medical leave: A 1% premium on wages since 2025, split between employer and employee. Benefits began in May 2026.
- Unemployment insurance: Employers pay on the first $12,000 of each employee's wages. New employers start around 2%.
- Property tax: Municipal property taxes are moderate to high. The BETE program exempts most business equipment placed in service after April 2007, and BETR reimburses taxes on some older equipment.
Forming a business in Maine: fees and ongoing costs
| Item | LLC | Corporation |
|---|---|---|
| Formation filing fee | $175 | $145 |
| Annual report | $85 (due June 1) | $85 (due June 1) |
| Franchise tax | None | Financial institutions only |
| Registered agent | Required | Required |
Worked example: $500,000 of profit
| Step | Amount |
|---|---|
| Taxable income | $500,000 |
| Maine corporate tax (3.5% on $350,000, 7.93% on $150,000) | $24,145 |
| Federal tax at 21% on $475,855 | $99,930 |
| Total income tax | $124,075 (24.8%) |
For a single LLC owner with $150,000 of Maine taxable income, state tax is about $10,205. At $75,000 it is about $4,843. The contrast is striking: a $500,000 corporation pays an effective state rate of 4.8%, while an owner earning $150,000 through an LLC pays about 6.8%.
How Maine compares with its neighbors
| State | Corporate rate | Top personal rate | Sales tax |
|---|---|---|---|
| Maine | 3.5% to 8.93% | 7.15% | 5.5% |
| New Hampshire | 7.5% BPT plus 0.55% BET | None on wages | None |
| Massachusetts | 8% | 9% | 6.25% |
| Vermont | 6% to 8.5% | 8.75% | 6% |
New Hampshire, Maine's only land neighbor, has no wage income tax and no sales tax, which draws businesses and shoppers across the border. Maine's corporate rate on small profits is lower, however.
Choosing an entity in Maine
Maine's structure creates an unusual incentive. A profitable small business can pay as little as 3.5% at the state level as a C corporation, compared with 7.15% for a pass-through owner. For a business retaining profit to reinvest, the C corporation can save state tax. Profits distributed as dividends are taxed again at personal rates, so the savings shrink if you pay everything out.
- LLC or S corporation: Simpler, with pass-through treatment and personal rates up to 7.15%.
- C corporation: Attractive for reinvesting businesses with less than $350,000 of profit.
Tax planning tips for Maine businesses
Claim BETE every year. The BETE exemption isn't automatic. Businesses must file an application with the municipal assessor by May 1 each year listing qualifying equipment.
Consider the Seed Capital Tax Credit. Investors in qualifying Maine businesses can receive state tax credits for a share of their investment, which helps early-stage companies raise money locally.
Plan for PFML. Budget for the 1% premium and update payroll systems to withhold the employee share. Employers with private plans that meet state standards can apply for an exemption.
Who pays the most in Maine
Maine's tax structure falls most heavily on pass-through owners with moderate to high incomes and on businesses with large property holdings in high-tax towns. A consultant or contractor earning $150,000 through a single-member LLC pays roughly $10,200 of state income tax, nearly as much as a corporation earning three times as much. Retailers along the New Hampshire border also compete with stores that charge no sales tax at all. By contrast, manufacturers benefit from BETE, and small C corporations that reinvest profits pay among the lowest corporate rates in New England.
Seasonal tourism businesses face their own considerations. Lodging is taxed at 9% and prepared food at 8%, so restaurants, inns and short-term rental operators collect higher rates than other retailers and must file returns even in quiet months if they hold a permit.
Recent changes for 2025 and 2026
- Paid family and medical leave benefits began in 2026, with premiums collected since 2025.
- Income tax brackets indexed for inflation.
- Pass-through and capital gains changes have been debated as part of budget discussions.
Is Maine a good state for business?
Advantages
- Low 3.5% corporate rate on the first $350,000
- Uniform statewide sales tax with no local add-ons
- Equipment exemption and reimbursement programs
- Quality of life and tourism economy
Drawbacks
- 7.15% personal rate applies at modest incomes
- Relatively high formation and annual fees
- Higher payroll costs from paid family leave
- Small labor market and aging population
Compliance checklist
- File a Certificate of Formation or Articles of Incorporation with the Secretary of State.
- Register with Maine Revenue Services for sales tax, withholding and income tax.
- Register for unemployment insurance and paid family leave if you hire.
- File BETE applications with your municipality by May 1.
- File the annual report by June 1.
- File Form 1120ME, or the pass-through information return, each year.
Compare Maine with its neighbors below or estimate your taxes in the United States calculator. See Corporation taxes for more.