Sec. 1. 36 MRSA c. 804 is enacted to read:

CHAPTER 804

LOCAL OPTION WAGE TAX

§5120.__Local option wage tax

1.__Municipalities authorized to adopt.__The legislative body of a municipality may impose a local option wage tax according to this chapter on the same wages subject to employer withholding under section 5250.__The tax may be applied at a maximum rate of 2% of the amount of Maine income tax owed under chapter 803 on wages.

2.__Notify assessor.__A municipality that imposes a local option wage tax under this section shall notify the State Tax Assessor at least 180 days before the local tax takes effect to provide the State with sufficient time to prepare for administration of the local tax.

3.__Withholding.__An employer in a municipality that has imposed a local option wage tax under this chapter shall deduct and withhold from the wages paid to a wage earner the tax imposed by this section.

4.__Employer's return and payment of tax withheld.__An employer required to deduct and withhold tax under this chapter shall file a withholding return and remit payment as prescribed by the assessor for each calendar quarter on or before the last day of the month following the close of the calendar quarter or such other reporting period as the assessor may require.__The bureau shall provide to every employer in a municipality that has imposed a local option wage tax a form and a pamphlet explaining the use of the form to use to file the withholding return and remit the payment of the tax imposed under this chapter.

5.__Payment to municipalities.__Each month the assessor shall identify the amount of revenue__actually collected and attributable to each municipality under this section, subtract the costs of administering this section and certify the net amount due each municipality from the Local Option Wage Fund established under subsection 11.__The Treasurer of State shall make monthly payments from the fund to the municipal treasurer of the net amounts certified by the assessor and adjusted by this subsection.__Revenue collected pursuant to this section is not considered to be receipts from the taxes imposed under this