This Technical Information Release (TIR) explains changes relating to sales and use tax, G.L. c. 64H and G.L. c. 64I, withholding requirements, G.L. c. 62B, and tax administration, G.L. c. 62C, contained in chapter 182 of the Acts of 2008. Except as noted otherwise below, these provisions were effective July 1, 2008.
II. New Limitations on Exemption for Pesticides
Section 41 of chapter 182 of the Acts of 2008 amends General Laws c. 64H, § 6(p) by removing the broad exemption for sales of pesticides and limiting the exemption only to sales to persons licensed or certified under G.L. c. 132B, or otherwise exempt under G.L. c, 64H, § 6(r). Thus, the exemption has been changed from a product-based exemption to a use-based exemption that should be claimed by giving an exemption certificate to the vendor at the time of purchase. For purposes of administering G.L. c. 64H, s. 6(p), as amended, the Commissioner will treat products containing both fertilizer and pesticides, insecticides, herbicides, fungicides, or miticides as taxable, unless the purchaser is eligible for one of the use-based exemptions described above.
B. Statutory Change
The amendment strikes out clause 3 of § 6(p), which currently exempts "sales of fertilizer, including ground limestone, hydrated lime, insecticides, fungicides, seed inoculants, seed disinfectants and plant hormones, as well as other substances commonly regarded in the same category and for the same use." In its place it substitutes the following:
(3) sales of fertilizer, including ground limestone, hydrated lime, seed inoculants and plant hormones, as well as other substances commonly regarded in the same category and for the same use, but not including any sales of pesticides, including insecticides, herbicides, fungicides, miticides and all materials registered with the Environmental Protection Agency as pesticides under Federal Insecticide, Fungicide and Rodenticide Act as well as other pesticides commonly regarded in the same category and for the same purpose except when purchased by a person licensed under chapter 132B or otherwise exempt under paragraph (r).
Under § 10 of G.L. c. 132B (the Massachusetts Pesticide Control Act), the Massachusetts Department of Agricultural Resources may authorize individuals to use pesticides and may establish such categories and subcategories as it deems necessary to restrict or condition the scope of pesticide use permitted within each classification. Persons wishing to be so licensed or certified, such as pest control or lawn care technicians, must contact the Massachusetts Department of Agricultural Resources, 251 Causeway Street, Suite 500, Boston, MA 02114-2151, Phone (617) 626-1700, Fax (617) 626-1850. Further information on licensing and applicator certification is available at: http://www.mass.gov/agr/pesticides/licensing/. The exemption under G.L. c. 64H, § 6(r) for sales of materials, tools and fuel to be used in agricultural production may also apply. To claim the exemption, a licensed pesticide applicator or a purchaser intending to use pesticides directly and exclusively in agricultural production should give a properly completed Form ST-12 to the vendor at the time of sale.
Section 40 of chapter 182 of the Acts of 2008 creates a new statutory provision in G.L. c. 64H that requires prepayment of sales tax on tobacco products at the time of a wholesale sale in Massachusetts. This change applies to wholesale sales of tobacco products on and after September 1, 2008.
B. Statutory Change
New Chapter 64H, § 3A requires that every person selling tobacco products (cigarettes, cigars, smoking tobacco, and smokeless tobacco) to others for resale in Massachusetts must prepay the sales tax on such products. The sales tax will be calculated on each sale by multiplying the sales tax rate set by G.L. c. 64H, § 2 (currently 5 percent) by the price at which such person sells the tobacco products at wholesale. The amount of the sales tax must be separately stated on the customer invoice or other record. Section 3A does not apply to manufacturers and unclassified acquirers to the extent they distribute tobacco products through a licensed wholesaler or unclassified acquirer. Section 3A allows a retailer of tobacco products a credit in the amount of the prepayment against the total amount of sales tax that would normally be due by the retailer for that period. The Department may publish further guidance regarding Section 3A. Sections 41 and 42 of chapter 182 of the Acts of 2008 amend G.L. c. 64H, § 33 and G.L. c. 64I, § 34 to provide that a person who has prepaid the tax under G.L. c. 64H, § 3A may avail itself of the bad debt reimbursement provisions applicable to the sales and use taxes. Also see TIR 08-7 and TIR 08-9 regarding additional recent statutory changes relating to tobacco products.
IV. Withholding Requirements
Section 19 of chapter 182 of the Acts of 2008 amends the withholding provisions in chapter 62B concerning the Commissioner's authority to require persons other than employers to withhold.
B. Statutory Change
This legislation makes two changes: first, it clarifies that in the case of S corporations and entities treated as partnerships, the Commissioner may require withholding with respect to the distributive shares of income attributable to shareholders or members; second, it applies sections 5 through 12 of chapter 62B to persons other than employers. Sections 5 through 12 relate to the withholder's obligation to make withholding statements, liability and applicable penalties for failure to withhold, assessments for failure to withhold, and tax credits allowed to those persons withheld upon. The Commissioner currently requires non-employer withholding on payment to performers. A proposed regulation, 830 CMR 62B.2.2: Pass-Through Entity Withholding, will be promulgated in final form in the near future, effective for tax years beginning on or after January 1, 2009. The Commissioner also plans to propose a new regulation requiring withholding on sales of real estate by non-residents.
V. Administrative Provisions
A. Demand Fee
Section 15 of chapter 182 of the Acts of 2008 increases the one-time "demand" fee established by G.L. c. 60, § 15, from $5 to an amount "not more than $30." The demand fee is applicable to taxes collected under G.L. c. 62C by G.L. c. 62C, § 46 and is added to and collected as part of the tax. A written demand for payment is issued when all or part of a balance due on a Notice of Assessment remains unpaid after the due date. See AP 610.2, AP 612.10.
B. Accrual of Late Pay Penalties
Section 21 of chapter 182 of the Acts of 2008 increases the rate at which late pay penalties under G.L. c. 62C, §§ 33(b) and (c) accrue from one-half of one percent a month to one percent a month. The maximum amounts of these penalties are unchanged at 25%.
C. Driver's License Revocation for Nonpayment of Tax
Sections 22, 23 and 24 of chapter 182 of the Acts of 2008 expand the Commissioner's authority to revoke or suspend licenses issued by Massachusetts agencies and clarify the licensee's appeal rights. Sections 23 and 24 provide that the Registry of Motor Vehicles shall revoke or suspend a driver's license, learner's permit, right to operate a motor vehicle, or certificate of motor vehicle registration for nonpayment of taxes upon notification from DOR. Section 22 provides that where a license is being revoked, suspended or non-renewed due to the nonpayment of taxes administered under 62C, the licensee's appeal rights are those provided under G.L. c. 62C to dispute tax assessments and that the licensee is not entitled to an additional hearing conducted by the agency issuing the license. If the taxpayer is outside of the statute of limitations for filing an appeal under G.L. c. 62C, and is unable to resolve the matter by entering into a payment agreement with DOR, he or she may further appeal to Superior Court, subject to the limitations described in G.L. c. 62C, §§ 47A, 47B, and 49A.
D. Extension of Limitations for Collection of Tax
Sections 25 and 26 of chapter 182 of the Acts of 2008 amend G.L. c. 62C, §§ 50, 65 to extend the statute of limitations for collection of taxes from 6 to 10 years, to coincide with previously extended lien provisions in G.L. c. 62C, § 50. Also see TIR 04-27, Section III., D. This change is effective January 1, 2009.
/s/Navjeet K. Bal
Navjeet K. Bal
Commissioner of Revenue
July 17, 2008
Revised TIR 08-8