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March 9, 2021

 

Early Remittance of Sales Tax – Changes Coming in April
Tell your legislators, Gov. Baker and Lt. Gov. Polito it’s not too late to fix, delay, or at least simplify it!
 
Legislature set to Pass UI Rate Freeze, PPP Taxability Fix, Emergency Paid Sick Package

 

The MA Legislature is moving to pass a legislative package this week to benefit both employers and workers and assist in the local economic recovery.  While the details have yet to emerge, the package reportedly would:

 

  • Freeze the unemployment insurance rate schedule for 2021 & 2022 – preventing a 60% increase in UI tax rates, and create a “temporary employer assessment" to keep the UI trust fund solvent;
  • Exclude forgiven Paycheck Protection Program (PPP) funds from taxable gross income in 2020 for small businesses organized as pass-through entities;
  • Create an emergency paid leave program (5 days) – paid by employers who will then be reimbursed by the state using federal stimulus funds, for employees who contract COVID-19, are ordered to quarantine, or need time off to get vaccinated. 

 
The details are important, but as the package has been explained to RAM by legislative leaders, RAM supports passage of this plan.  We urge our members to support it as well.

 

But don’t forget about the Sales Tax Prepayment Fix…

 

The Legislature should also reform the state’s recently amended sales tax remittance process slated to take effect on April 1st.  The law requires certain vendors—those with cumulative sales, meals and room occupancy tax liability over $150,000 in the preceding calendar year—to remit on or before the 25th day of the filing period any sales/meals/room tax collected on or before the 21st day of the filing period.  This 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, by April 25th.  See the Department of Revenue (DOR) Working Draft Technical Information Release (TIR) for additional information.

 

This is a budget gimmick, typically enacted in tough times to provide a one-time revenue advance by essentially grabbing three weeks of collections from next fiscal year and moving them back into this fiscal year.  But with a massive infusion of federal stimulus money now on the horizon, we could certainly argue now for the state hold off on this move. 
 

Ask the Legislature to:

  • Option #1 – Repeal it. Save it for a rainy day when you might need it again.
  • Option #2 – Delay it. Delay it to June 1, allow more time to prepare, the economy to continue to rebound, and assess if it’s truly needed in light of the forthcoming federal stimulus.  June is the only month that matters as you seek to advance what would be July remittances (FY22), back into June (FY21).  We can wait.
  • Option #3 – Simplify it.  23 states require some type of sales tax prepayment.  All of them allow for a “safe harbor” provision, allowing vendors to make an estimated payment, typically based on a percentage of the total collections from the same month of the preceding calendar year.  75% of the same month the preceding year is equal to more than the first 21 days of the month’s collections.  This option is revenue neutral, but administratively simple for the taxpayer.  That’s why every other prepayment state does it.

 

As you know, RAM has been at the center of the fight on issues related to the remittance of sales tax since Governor Baker first proposed a switch to “Real Time” sales tax collection four years ago. This is not that.  This is a budget gimmick, a money grab…at least make it easy to administer.  Especially considering this new mandate is happening despite the fact that Massachusetts is one of the few sales tax states with no vendor’s collection allowance or vendor discount to acknowledge the cost of collection. 

 

Why not save it for when you might need it again, or at least make it simple to administer for businesses now struggling to rebound from the pandemic’s economic crisis?