I. Background

Newly enacted legislation changes the rate of sales/use tax from 5% to 6.25% on sales at retail of tangible personal property, including alcoholic beverages, and telecommunications services effective August 1, 2009. See TIR 09-11. As a result of this change, and of certain transition rules applicable to it, [1] a vendor who reports on a quarterly or annual return will be required to file a sales/use tax return for a period that will include both sales before and sales after the change in sales/use tax rates.

II. Reporting

  • Every vendor whose sales and use tax liability (exclusive of the sales tax on meals) is reasonably estimated to be $100 or less for the calendar year must file a sales and use tax return and pay the tax due on an annual basis. The sales and use tax return and payment for the period of January 1st to December 31st, inclusive, is due on or before the following January 20 th. 830 CMR 62C.16.2, (4)(b).

  • Every vendor whose sales and use tax liability (exclusive of the sales tax on meals) is reasonably estimated to be more than $100 but not more than $1,200 for the calendar year must file a sales and use tax return and pay the tax due for each calendar quarter on or before the twentieth day of the month following the close of that calendar quarter. Id.§ (4)(c).

This TIR deals with the reporting requirements for the quarterly return for the period July 1, 2009 through September 30, 2009, and the annual return for the period January 1, 2009, though December 31, 2009.

Sales/use tax vendors who file on a quarterly or annual basis for the periods set out above are instructed to make an adjustment of 20% on line 2 of their sales and use tax return for those gross sales reported on line 1 of the form that are properly taxed at 5%, i.e., sales made before August 1, 2009.

Business purchasers of tangible personal property reporting use tax obligations on property subject to the 5% rate should list the purchase price of this property at 80% of the actual cost, either on line 5 on their Sales and Use Tax Return, or on line 2 of the ST-10 (Business Use Tax Return), whichever form is applicable. Individual purchasers filing Form ST-11 (Individual Use Tax Return) should similarly adjust their returns.

Examples:

  1. A vendor with a quarterly filing requirement has gross receipts of $100.00. Of these gross receipts, $20.00 is taxable at the 5% rate. The vendor reports the $100.00 gross receipts on line 1, and takes an adjustment of 20% ($20.00 x .2 = $4.00) on line 2. Tax is reported at $96.00 x.0625= $6.00. This is equivalent to reporting $80.00 at .0625% ($5.00) + $20.00 at .05 ($1.00).

  2. A corporation purchases $800.00 of materials subject to use tax, $100.00 of which is taxable at the 5% rate. The corporation should report taxable purchases of $780. ($700.00 + ($100.00 x .8), taxable at 6.25%, or $48.75. This is the equivalent of $700.00 x .0625% ($43.75) + $100.00 x .05% ($5.00).

III. Recordkeeping

Vendors must maintain normal business records showing the date of sale, item(s) purchased and selling price in a manner sufficient to determine whether the proper amount of tax has been paid. These records must be kept for the amount of time specified in the Record Retention Regulation, 830 CMR 62C.25.1, and must be produced for review by the Department in the course of an audit of the vendor.

A vendor that back-dates contracts or other documents on or after August 1, 2009 in order to improperly avoid collecting and remitting sales or use tax at the 6.25% rate may be subject to the tax evasion penalties of G.L. c. 62C, § 73, including a felony conviction, a fine of not more than $100,000 or $500,000 in the case of a corporation, or by imprisonment for not more than five years, or both, and may also be required to pay the costs of prosecution.

/s/Navjeet K. Bal
Navjeet K. Bal
Commissioner of Revenue

NKB:ECL:lr

July 27, 2009

TIR 09-12



[1] The Department is also authorized by law to establish transition rules allowing certain sales of tangible personal property pursuant to earlier contracts or arrangements to be taxed at 5% for a limited period of time following the effective date. The legislation also provides that for certain periodic bills for utilities, the new rate applies to the first billing period beginning on or after the effective date of the increase. For the rules applicable to these contracts and bills, see TIR 09-11.