Advanced Payment of Sales Tax Changes Effective TODAY - DOR Releases Final Guidance Allowing for Flexibility Sought by RAM
The MA Department of Revenue (DOR) has issued the final TIR: 21-4: Tax Provisions in the Fiscal Year 2021 Budget, guidance relative to the implementation of the advanced payment of sales/meals/room taxes (prepayment) as required by provisions passed in last year’s budget. The changes are effective April 1, 2021. All RAM members are urged to closely review the new guidance, which will require many members to make two payments in April – the regular remittance for the month of March and an advanced April payment for the first 21 days of sales. However, the Department has seemed to provide for some temporary flexibility in calculating the advanced payment.
As you know, RAM has argued for months first with the Legislature and then with the Department that the language should be amended to allow for an administratively simple, estimated prepayment to be made as is the practice in all of the other prepayment states. Many RAM members joined our call for flexibility, and the Department has heard our concerns and taken steps to address them. Note the highlighted section of the text below, pulled from the TIR, which clarifies that through December 2021, underpayment penalties will be waived if the taxpayer makes an advanced payment equal to 80% or more of the total tax liability from the preceding month. This is in line with one of the options we had suggested as a fix.
The advanced payment requirement applies to all vendors whose cumulative MA sales/meals/room tax liability in the immediately preceding calendar year was $150,000 or more. Those vendors must remit on or before the 25th day of the filing period any tax collected on or before the 21st day of the filing period. As explained in the TIR, the vendor may also choose to remit 80% of the previous month’s tax liability to satisfy this requirement. The Department of Revenue (“Department”) has received comments from taxpayers concerned about having the necessary sales data in time to comply with the advance payment requirement by the 25th day of the monthly tax period. To address those comments, for advance payments due from April 2021 through and including December 2021, the Department will presume that reasonable cause exists for the waiver of an otherwise applicable underpayment penalty where the taxpayer makes an advance payment on or before the 25th that is equal to 80% or more of the taxpayer’s total tax or excise due for the immediately preceding month, provided that there was such a liability in the prior month. Taxpayers subject to the 5% underpayment penalty who did not make an advance payment greater than or equal to 80% of the prior month’s liability may also demonstrate reasonable cause for a penalty waiver based on other applicable facts.
The additional change in law implemented by the TIR is the change in the due date for the filing of sales tax returns. Effective for tax periods beginning on or after April 1, 2021, sales and use tax returns will be due within 30 days after the close of the tax period – an additional 10 days later than the old requirement for returns due within 20 days after the close of the tax period. For the April 2021 monthly tax period, returns will be due on or before May 30, 2021.
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