Retailers don’t want to be Baker’s $1B ‘guinea pig,’ group says 

By Greg Ryan  – Law and Money Reporter, Boston Business Journal

Gov. Charlie Baker won cheers from Massachusetts retailers this month with legislation that would make the annual sales-tax holiday permanent. But on another new proposal, he and the industry find themselves at loggerheads.

In a letter to state lawmakers on Monday, the Retailers Association of Massachusetts strongly opposed Baker’s proposal to require retailers to hand over sales taxes on certain purchases to the state daily, rather than monthly, saying it would cost more than $1 billion to implement without providing any meaningful benefit.

The state currently collects sales taxes on many purchases made with credit and debit cards on a monthly basis. In January, as part of his annual budget, Baker proposed requiring retailers to set aside the sales tax on each of those purchases at the point of sale and to remit the taxes to the state daily. Retailers say that to do so, they’d need to install a new payment technology system.

Baker floated the same proposal last year, with the switchover scheduled for 2018, but shelved the idea amid an outcry from businesses. His new proposal moves the switchover out to 2021, to give businesses more time to make the transition. But the extended timeline hasn’t won over RAM, the state’s most powerful retail lobbying group.

In the letter, RAM Vice President Bill Rennie made the case that it’s not a matter of needing time to prepare for the transition, but rather that the transition isn’t worthwhile, period. A new system would generate no new revenue for Massachusetts, but according to one industry study, would cost businesses more than $1.2 billion in total to implement and $28 million a year to maintain, he said.

No other state requires real-time sales tax collection, Rennie added.

“We urge the Legislature to resist the administration’s desire for the commonwealth to be the guinea pig in this endeavor to become the first state or taxing jurisdiction anywhere to attempt to pursue this unproven system,” he said.

If implemented, the proposal seems like it would make obsolete the chip-card readers that retailers installed over the past few years, a waste of millions of dollars, according to Rennie. It would also complicate customers’ return of merchandise they don’t want, he said.

“Sales tax already having been remitted to the state in supposed ‘real time’ would need to be refunded by the state back through the processor to the retailer and to the customer – many thousands of times per day,” Rennie said. “The sheer volume of returns cannot be understated.”

Sarah Finlaw, a spokeswoman for the state’s finance agency, said in a statement to the Business Journal that the proposal would modernize the collection of sales taxes and cut down on unlawful withholding of tax revenue.

“We look forward to hearing valuable feedback from various stakeholders in the coming months and working with the Legislature to best modernize this process,” Finlaw said.

Rennie said in his letter that retailers would prefer not to act as the state’s tax collectors. In dozens of other states, retailers are compensated in some way for playing that role, but not in Massachusetts, he said.

State lawmakers are still hearing from businesses and others about the proposal. Last year, in response to Baker’s first proposal to remit sales tax in real time, locally based businesses from Dunkin’ Brands to Santander Bank, as well as national companies like Mastercard and Discover, came out in opposition to the shift.