Sec. 3. 36 MRSA §1760, sub-§74, as enacted by PL 1989, c. 871, §15, is amended to read:

74. Property used in production. Sales of tangible personal property, other than fuel or electricity, that becomes an ingredient or component part of, or that is consumed or destroyed or loses its identity directly and primarily in either the production of tangible personal property for later sale or lease, other than lease for use in this State, or the production of tangible personal property pursuant to a contract with the United States Government or any agency of the United States Government. Tangible personal property is "consumed or destroyed" or "loses its identity" in that production if it has a normal physical life expectancy of less than one year as a usable item in the use to which it is applied. Sales of tangible personal property used in the production of prepared food or used in the operation of a hotel or rooming house are also exempt under this subsection.

SUMMARY

Under current law, the sale of items to be used in the production of certain tangible personal property is not subject to the sales tax. This bill extends that treatment to the food service industry and lodging industry. This bill exempts from the sales tax sales of tangible personal property used in the production of prepared food or used in the operation of a hotel or rooming house. It also exempts from the sales tax sales of machinery and equipment used in the production of prepared food or used in the operation of a hotel or rooming house. These exemptions parallel existing exemptions for property used in production and machinery and equipment, respectively.