Close
Close

Massachusetts OKs accelerated sales tax payments

RFP
Contacts

Michael Cronin
Boston
T +1 617 848 4999

Gabe Garcia
Boston
T +1 617 848 483

Brandon Salk
Boston
T +1 617 973 4748

Jamie C. Yesnowitz
Washington, DC
T +1 202 521 1504

Chuck Jones
Chicago
T +1 312 602 8517

Lori Stolly
Cincinnati
T +1 513 345 4540

Patrick Skeehan
Philadelphia
T +1 215 814 1743
On Dec. 11, 2020, Massachusetts Gov. Charlie Baker approved a $46 billion budget for the 2021 fiscal year.1 Among other items, the budget contains a provision for the accelerated payment of monthly sales, room occupancy and/or meals tax collected by certain businesses, with a new remittance timeline taking effect on April 1, 2021.

Background Under current law, for monthly Massachusetts filers, sales and use tax returns and payments are generally due the 20th day of the following month after the period in which the sale is made.2 However, accelerated sales tax remittance has been a long-sought legislative priority of Gov. Baker’s administration. Previously, the governor’s administration supported measures that would have required the remittance of sales tax on a real-time or daily basis.

Accelerated sales tax remittance rules Effective April 1, 2021, monthly return filers whose sales and use tax, room occupancy tax or meals tax liabilities exceeded $150,000 in the prior calendar year must remit such taxes collected through the first three weeks of the month by the 25th day of that month.3 Tax collected during the remainder of the month will be due with the subsequent return, which will now be due by the 30th day of the month following the reporting period (rather than the 20th day).4

As an example, sales tax collected in April for the first 21 days of the month will be due April 25. Sales tax collected in April for the last nine days of the month will be due by May 30. Generally, the legislation includes a 5% underpayment penalty, unless such penalty was due to reasonable cause.5 However, the penalty will not apply if the accelerated payment for the first three weeks is at least 70% of the aggregate tax collected during the reporting period.6

Commentary The enacted budget legislation represents the culmination of Baker’s efforts to modernize sales tax collection and remittance in Massachusetts. According to the governor’s office, the new remittance timeline is expected to apply to approximately 5% of businesses operating in Massachusetts.7 While the governor’s administration initially proposed real-time or daily sales tax remittance in previous versions of the budget, business groups were highly critical of such proposals, noting the cost and complexity associated with the daily remittance of sales tax.8 In response, business groups advocated for legislative amendments proposing sales tax prepayment programs as an alternative to accelerated sales tax collection.9 However, such amendments did not make it into the final version of the budget, with the Massachusetts legislature ultimately coming to an agreement on the accelerated payment provision.

Massachusetts sales tax filers that are subject to the new accelerated remittance requirement will now be required to track two separate filing and payment deadlines. One deadline concerns the first three weeks of sales tax collected (due on the 25th of the current month), and the second concerns sales tax collected in the remainder of the month (due the 30th of the following month). Affected filers will need to ensure their sales tax collection processes and procedures are updated to account for the accelerated remittance requirement. This may require significant modifications to and investment in a company’s current sales and use tax compliance process. For example, any sales tax compliance software utilized by Massachusetts sales tax filers will need to be updated to ensure the new requirement and associated due dates are appropriately reflected.

We anticipate that the Massachusetts Department of Revenue will soon be issuing regulations and guidance addressing the newly enacted sales tax acceleration requirement with further illustrative examples. From a return filing perspective, it is expected that the regulations will address whether taxpayers may file one return to report sales tax collected from the first three weeks of the current month and the remaining sales tax collected from the previous month, or whether separate returns and payments will be required. Additionally, the regulations may elaborate on how the Department defines “collections.” For example, “point of sale” transactions would likely be subject to the accelerated remittance requirements, because tax is collected instantaneously on such transactions. However, there are a number of transactions whereby sales tax is not collected from the customer in real time depending on the billing terms between the vendor and customer. Further guidance will be needed to address sales tax received from customers that are not instantaneous (i.e. in arrears), and whether these types of transactions will also be required to be remitted on an accelerated basis.

With Massachusetts joining a small number of states adopting an accelerated sales tax payment provision,10 it will be interesting to see whether other states will implement similar expedited sales tax remittance procedures, or even go as far as mandating real time or daily tax collection and remittance.



1 H.B. 5164, Laws 2020.
2 MASS. GEN. LAWS ch. 62C, § 16.
3 H.B. 5164, § 30, adding MASS. GEN. LAWS ch. 62C, § 16B.
4 H.B. 5164, § 29, amending MASS. GEN. LAWS ch. 62C, § 16.
5 H.B. 5164, § 30, adding MASS. GEN. LAWS ch. 62C, § 16B.
6 Id.
7 Press Release, Office of Governor Charlie Baker, Dec. 11, 2020.
8 See Prepayment is Preferable to Daily Sales Tax Remittance, Massachusetts Taxpayers Foundation, Nov. 2020.
9 For example, the Retailers Association of Massachusetts supported an amendment giving businesses the option to pay 75% of their full month’s tax liability for the preceding calendar year for purposes of simplifying the tax calculation. Press Release, Retailers Association of Massachusetts, Nov. 17, 2020.
10 For example, Pennsylvania requires certain businesses to make sales tax prepayments based on their sales tax liability during the third quarter of the previous calendar year. Taxpayers that remitted between $25,000 and $100,000 in sales tax in the prior third calendar quarter may remit either 50% of the actual tax liability for the same month of the previous year, or at least 50% of the actual tax liability for the current period. 72 PA. STAT. § 7217(a)(3). Taxpayers that remitted at least $100,000 in the prior third calendar quarter must remit 50% of the actual tax liability for the same month of the previous year. 72 PA. STAT. § 7217(a)(4).



This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes.