Recently enacted legislation establishes a new local option sales tax on meals, G.L. c. 64L, and also increases the maximum rate of the local option room occupancy excise, G.L. c. 64G, § 3A, for cities or towns that adopt this increase. See St. 2009, c. 27, §§ 51, 52, 60, 154, and 156. This Technical Information Release provides guidance concerning this legislation. The local option meals tax and increased local option room occupancy excise can be effective October 1, 2009 or later.
II. Local Option Sales Tax on Meals
Pursuant to St. 2009, c. 27, § 60, the Legislature added a new chapter to the General Laws, chapter 64L: "Local Option Meals Excise." Under this chapter, a city or town that accepts the provisions of this chapter in the manner provided by G.L. c. 4, §. 4 may impose a local sales tax on the sale of restaurant meals originating within the city or town by a vendor at the rate of .75 percent of the gross receipts of the vendor from the sale of restaurant meals. G.L. c. 64L, § 2(a). This local excise, which is imposed in addition to the 6.25% state sales tax on meals, takes effect on the first day of the calendar quarter following thirty days after acceptance by the city or town or on the first day of a later calendar quarter that the city or town may designate. G.L. c. 64L, § 2(c). A city or town must vote to adopt this increase not later than August 31, 2009 in order to impose the additional excise starting on October 1, 2009. The city or town must immediately notify the Department of Revenue's Division of Local Services of such action and will be requested to verify a list of meals tax vendors licensed to do business in that city or town. The verified information will be used by DOR to notify vendors of their obligations to collect and pay over the local excise and to ensure that sales are properly sourced to each community. Further guidance for cities and towns is available at http://www.mass.gov/Ador/docs/dls/publ/bull/2009/2009_15B.pdf .
Reimbursement for the local meals tax must be paid by the purchaser to the vendor. Each vendor in the Commonwealth must add the tax to the sales price of the meal and collect from the purchaser the full amount of the tax imposed under G.L. c. 64L, as well as the 6.25% state tax on meals. G.L. c. 64L, § 4.
Upon each sale of a restaurant meal taxable under chapter 64L and 64H, the total amount of tax collected by the vendor from the purchaser must be stated and charged separately from the sales price and shown separately on any record thereof at the time the sale is made or on any evidence of sale issued or used by the vendor. The amounts of state and local taxes on meals may, but are not required to be, shown as separate line items. If the state and local tax are combined, the sales check should describe that line as "state and local tax," or the menu should contain a notation that state tax of 6.25% and local tax of .75%, totaling 7% are added to the total price of the meal. For restaurant sales of alcoholic beverages for on-premises consumption sold without a meal, the tax collected need not be stated separately. G.L. c. 64L, § 5.
A vendor of meals must file returns and pay the local tax imposed under G.L. c. 64L, § 2 to the Commissioner at the same time and in the same manner as the sales tax due the Commonwealth. G.L. c 64L, § 2(a). These general requirements are set forth in G.L. c. 62C, § 16.
The Telefile option for meals tax vendors will be discontinued effective October 1, 2009. Meals tax vendors previously using Telefile are encouraged to register and file using Webfile for Business, available at www.mass.gov/dor. Meals tax vendors with an aggregate annual liability for wage withholding, room occupancy, and sales and use taxes of $10,000 or more, new registrants, and meals tax vendors with more than one location must file electronically through Webfile for Business; other meals tax vendors are encouraged to do so. See TIR 04-30. Also effective October 1, 2009, electronic payments for meals tax must be made using the ACH debit method; ACH credit will no longer be accepted for meals tax obligations.
On and after October 1, 2009, vendors with multiple locations in Massachusetts that had previously filed their sales tax on meals returns on a consolidated basis will be required to break out their sales by each location. The Department will be contacting each registered vendor to ensure that DOR records correctly reflect the vendor's actual business locations in Massachusetts, and not just the main or corporate office location.
B. Distribution of Proceeds to Municipalities
All sums received by the Commissioner from payment of the local sales tax on meals under G.L. c. 64L will, at least quarterly, be distributed, credited and paid by the State Treasurer upon certification by the Commissioner to each city or town that has accepted the provisions of chapter 64L in proportion to the sums received from the sales of restaurant meals in that city or town. G.L. c. 64L, § 2(b). Any city or town seeking to dispute the Commissioner's calculation of its distribution under G.L. c. 64L, § 2(b) must notify the Commissioner, in writing, not later than one year from the date the tax was distributed.
C. Sourcing and Registration Rules
Except as otherwise provided, a sale of a meal by a restaurant or caterer is sourced to the business location of the vendor if (1) the meal is received by the purchaser at the business location of the vendor or (2) if the meal is delivered by the vendor to a customer, regardless of the location of the customer. A vendor with multiple business locations in the Commonwealth must separately report sales sourced to each location through Webfile for Business.
- Restaurants that deliver meals must source those sales to each Massachusetts business location from which deliveries are made and must register with DOR for each such business location.
- Caterers with business locations in Massachusetts must source their sales to their Massachusetts business location where food is prepared and register that location. Caterers with no business location in Massachusetts must source their sales to the Massachusetts city or town where they have the highest total sales and register with DOR for that location, using the address of the city or town's licensing authority. See DD 06-3 for the taxability of sales by caterers.
- Restaurant meal delivery companies that purchase meals for resale must source their sales to the delivery location indicated by instructions for delivery to the purchaser and must separately report sales by city or town and register with DOR for each such city or town, using the address of the city or town's licensing authority. See DD 04-6 for the definition of restaurant meal delivery company.
- Transient vendors, such as providers of meals at fairs and special events with a fixed location, must separately register with DOR as a seasonal vendor for each such event in Massachusetts, indicating on their registration the month or months when the event will take place and the location, using the address of that city of town's licensing authority or the address of the venue where the event will be held.
- Sales by transient vendors without a fixed location, such as canteen trucks, are sourced to the business location of the vendor, unless that location is out-of-state, in which case the sales are sourced to the city or town where the vendor makes the highest total sales. Such a vendor must register with DOR using the address of that city or town's licensing authority.
The Commissioner has the authority to adopt future additional rules or regulations requiring destination sourcing for caterers or other vendors with a high volume of delivered meals. G.L. c. 64L, § 3.
D. Liability of Vendors and Responsible Persons
Every person who fails to pay the Commissioner any sums required under G.L. c. 64L shall be personally and individually liable to the Commonwealth for such sums. The term "person" includes but is not limited to an officer or employee of a corporation, or a member or employee of a partnership or limited liability company, who as an officer, employee or member is under a duty to pay over local option meals taxes. G.L. c. 64L, § 6.
III. Local Option Room Occupancy Excise Rate Increase
The recently enacted legislation, St. 2009, c. 27, §§ 51, 52, increases the maximum rate of the local option room occupancy excise from 4% to up to 6%, (from 4.5% to up to 6.5% in the City of Boston) provided that each city or town votes to accept the increased rate in accordance with the provisions of G.L. c. 64G, § 3A. The new rate may be imposed effective on the first day of the calendar quarter following thirty days after acceptance of the increased rate, or on the first day of such later calendar quarter as the city or town may designate.
In order to impose the local option room occupancy excise, a city or town must determine the new rate of the local excise, and then must immediately notify the Department of Revenue's Division of Local Services of its acceptance of the local excise, the rate at which the local excise is to be imposed, and the effective date of the rate change. A city or town must vote to adopt this increase not later than August 31, 2009 in order to impose the additional excise starting on October 1, 2009. Further guidance for cities and towns is available at: http://www.mass.gov/Ador/docs/dls/publ/bull/2009/2009_15B.pdf .
/s/Navjeet K. Bal
Navjeet K. Bal
Commissioner of Revenue
July 23, 2009