Massachusetts Accelerated Sales Tax Payments
Massachusetts Governor Baker signed HB 5164 into law in December 2020 with critical process and timing changes for certain monthly sales and use, room occupancy and meals tax filers which take effect on April 1, 2021.
Specifically, filers of these monthly returns whose tax liabilities in the prior calendar year (i.e. 2020) exceed $150,000 must now remit such taxes on a “split” schedule:
- Tax collected on sales made in the first 21 days of the month to be reported and paid to the Department of Revenue by the 25th day of the current month; and
- Tax collected on sales made in the remainder of the month to be reported and paid by the 30th day of the following month. Underpayment penalties will apply unless due to reasonable cause or the accelerated payment reaches safe harbor level of 70% of aggregate tax due for the filing period.
Q: How Does All This Really Work?
A: Using the example from the draft information release, Super Toys Inc., a retail vendor, has $500,000 in total gross receipts from taxable sales in the month of April. Super Toys has $255,992 in taxable sales from April 1, 2021 through and including April 21, 2021, and remits $16,000 on April 25, 2021 ($255,992 x 0.0625). Based on its total taxable sales for April, Super Toys’ total sales tax due for the filing period is $31,250 ($500,000 x 0.0625), and it must remit the remaining tax due of $15,250 with the return it files on or before May 30, 2021. Although Super Toys remitted less than 70% of the total tax due for the month (the safe harbor), there is no underpayment that is subject to the 5% underpayment penalty because it remitted the amount required to be remitted on April 25.
Q: Does This Really Start in April?
A: Yes! This represents a significant change in the tax filing process for effected taxpayers. If you are a Massachusetts registered vendor and your 2020 sales and use, room occupancy and meals tax liability exceeded $150,000, your Massachusetts returns calendar for April 2021 has changed as follows:
|Old Filing Regime:||May 20th: Tax return and payment due for April sales|
|New Filing Regime:||April 25th: Tax payment due for sales made from April 1st through April 21st|
|May 30th: Tax return and payment due for April 22nd through April 30th|
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