Maine Cottage Food Sales Tax: The 75% Rule and What Gets Taxed

Maine does not tax all food the same way. A sealed jar of jam is tax-exempt. A single-serving cupcake is taxed at 8%. And if your cupcake sales are large enough relative to everything else you sell, the 8% rate can pull otherwise-exempt items into the taxable category, subject to the bulk-staples exception. This is the 75% rule, and it catches home food producers who do not track their sales mix from the start.

The Two Tax Rates

Maine applies two distinct rates to food products:

Tax-exempt grocery staples — Bread (sold as loaves), sealed jars of jam and jelly, packaged granola, dry spice mixes, honey, maple syrup, roasted coffee, and similar items sold in standard retail packaging. These are exempt from Maine's 5.5% general sales tax.

8% prepared food rate — Single-serving baked goods (individual cookies, cupcakes, muffins sold individually), confections (candy, fudge, truffles), and any food sold for immediate consumption (ready-to-eat sandwiches, soups, hot meals). Maine taxes these at 8%, not the standard 5.5% — this is a separate prepared food and lodging tax rate.

The classification depends on how the product is packaged and sold, not how it is made. A dozen cookies sold in a sealed bag as a multi-serving package may qualify as a grocery staple. The same cookies sold individually are prepared food.

The 75% Rule

Here is where it gets consequential. If prepared food (the items taxed at 8%) accounts for 75% or more of your total food sales, the 8% rate applies to food and beverage sales that would otherwise qualify for the grocery exemption — including individual cookies, packages of chips, or cold beverages. Bulk grocery staples, such as whole loaves of bread, remain exempt even after the threshold is exceeded.

A home baker who sells mostly individual cupcakes and muffins (prepared food at 8%) alongside packaged cookies or other items that would normally be exempt must apply the 8% rate to those items once prepared food revenue crosses the 75% threshold. Bulk grocery staples, such as whole loaves of bread, remain exempt.

The rule is calculated on total food sales, not by individual product. Track your revenue by tax category from day one. If you are approaching the 75% line, consider adjusting your product mix or packaging strategy — selling cookies in multi-packs (grocery staple) rather than individually (prepared food) shifts the classification.

How to Register

If any of your products are taxable, you need to register with Maine Revenue Services through the Maine Tax Portal (MTP). Registration is free and gives you a sales tax certificate number.

Once registered:

• Collect the applicable tax at the point of sale
• File regular sales tax returns on the schedule assigned by Maine Revenue Services
• Remit collected taxes to Maine Revenue Services on the filing schedule

If all of your products are genuinely tax-exempt grocery staples (loaves of bread, sealed jars of jam), confirm with Maine Revenue Services whether registration is required for your business. If there is any ambiguity about classification, ask MRS before you start selling.

Common Product Classifications

Edge cases exist. A fruit pie sold whole for later consumption may be exempt; the same pie sold by the slice at a farmers' market is prepared food. When in doubt, contact Maine Revenue Services for a product-specific ruling.

Farmers' Market Tax Collection

If you sell at farmers' markets, you collect tax at the booth — either built into your displayed prices or added at the register. Keep records of each market day's sales broken down by taxable and exempt categories.

Some markets require vendors to show their sales tax certificate as part of vendor approval. Having it ready avoids last-minute scrambling.

The Maine Cottage Food & Home Food Business Guide covers the full tax classification framework, including the 75% rule calculation and the Maine Tax Portal registration walkthrough.

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