Massachusetts Releases Guidance in Connection with Recent Sales/Use Tax Changes

As mentioned in our previous article, the final 2021 fiscal year Massachusetts budget included some important sales/use tax changes, namely a change in the due date for returns and a new requirement for certain taxpayers to make prepayments of taxes. The Department of Revenue (hereinafter “the Department”) recently released guidance supplementing the working draft Technical Information Release that was published in mid-February in the form of FAQs posted on its website to provide much-needed additional information regarding the implementation of these changes.

Due Date Change

Beginning with returns due for periods ending after April 1, 2021, sales/use tax returns that were previously due twenty (20) days following the close of the tax period for which the taxpayer is required to file will now be due thirty (30) days following the close of the tax period. Payments are also now generally due on this later date (see the section below, however).

This change applies to a wide variety of filers and tax types, including sales/use tax, meals tax, sales tax on services, marijuana retail taxes, and room occupancy excise tax (including filings by intermediaries). There is a helpful chart on the Department’s website that serves as a reference.

For most taxpayers, the Department’s recently released FAQs clarify certain previously open items, including the fact that this new due date does not apply to materialmen (these returns remain due fifty (50) days following the close of the tax period), nor do they impact annual use tax returns on purchases, which generally remain due on April 15 of the following year. Additionally, these changes do not impact the previously announced COVID relief provisions (more information regarding those provisions, and other pandemic-specific guidance, can be found here).

Prepayment Requirements

Some vendors and operators will now be required to remit tax payments prior to the time when their returns are due. This change is a significant one, which also applies to tax periods ending after April 1, 2021.

This new prepayment requirement applies to taxpayers who reported more than $150,000 of cumulative liability for the following types of tax to Massachusetts during the prior year:

  • Sales/use tax;
  • Sales tax on services;
  • Meals tax;
  • Room occupancy excise; and,
  • Marijuana retail taxes

The Department has provided a helpful chart for use by taxpayers in determining whether they are subject to this new prepayment requirement.

If a taxpayer is subject to the prepayment requirements, then the required advance payment will be due on the twenty-fifth (25th) of the month in which the tax was collected and it is based on the tax collected for the first twenty-one (21) days of the month. There is no requirement to submit a return or any sort of payment vouchers at that time. Any remaining tax for the month will be due with the tax return for that month.

So, for example, the first advance payments under this new law will be due on April 25, 2021, and will consist of the total tax liability for April 1 through April 21. The April return and final payment for a monthly filer whose tax period ends on April 30, 2021, will be due on May 30, 2021. As usual, if the due date for either a return or payment falls on a weekend or holiday, the due date defaults to the next business day.

The recently released FAQs provide clarification of many of the questions that have been submitted to the Department by practitioners and taxpayers in the weeks since the FY 2021 budget was finalized. Most notably, estimates are not allowed and penalties may be imposed on those who do not meet a 70% safe harbor. We will continue to monitor these changes, and suggest returning to the FAQs website frequently as they are being updated on a regular basis.

If you have any questions, please contact Leanne Scott or your preferred BNN professional at (800) 244-7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.