The City of Cambridge has adopted an amendment to the Municipal Code of the City of Cambridge. See Ordinance Number 1366, cited as the "Bring Your Own Bag Ordinance" (Ordinance), effective March 31, 2016, which is designed to encourage the use of reusable bags by shoppers. The Ordinance requires Cambridge retail establishments, including restaurants, to impose a minimum charge to be established by the Cambridge Commissioner of Public Works for a checkout bag when a retailer provides bags to customers. This charge must be separately stated on a receipt provided to the customer at the time of sale and must be identified as the "Checkout Bag Charge." The purpose of this Technical Information Release (TIR) is to explain the application of the Massachusetts state sales tax, including the state sales tax on meals, G.L. c. 64H, and the local option meals tax, G.L. c. 64L, to sales of checkout bags under the Ordinance.
II. Application of State Sales Tax To Sales Governed by the Ordinance
Chapter 64H of the General Laws imposes a 6.25% sales tax on all sales at retail by a vendor engaged in the business of making retail sales of tangible personal property, including meals, in Massachusetts, unless a specific statutory exemption applies. G.L. c. 64H, § 2. For purposes of G.L. c. 64H, a "vendor" is defined as a "retailer or other person selling tangible personal property or services of a kind the gross receipts of which are required to be included in the measure of the tax imposed by [chapter 64H]". G.L. c. 64H, § 1. The tax must be paid by the vendor to the Commissioner of Revenue at the time provided for filing the return required by G.L. c. 62C, § 16.
The sales price, upon which the state sales/meals tax is based, is the total amount paid by a purchaser to a vendor as consideration for a retail sale or the sale of the meal, valued in money or otherwise. See G.L. c. 64H, § 1; 830 CMR 64H.6.5(7). The sale of meals may also be subject to a local option tax on meals. See G.L. c. 64L; see also section III of this TIR for further explanation of the local option meals tax.
The exemptions from the sales tax are found in section 6 of chapter 64H. Subsection (q) exempts certain types of containers from the sales tax. The Commissioner has determined that the checkout bags subject to the Ordinance are not containers described in subsection (q) and therefore are not exempt from sales tax under this provision. Accordingly, when checkout bags are sold by a retail establishment to customers under the Ordinance, they are subject to state sales tax, including the sales tax on meals. Consequently, the retail establishment must collect, remit, and report tax due on the sales price of the bags sold to its customers. See section IV of this TIR for methods of reporting applicable tax on the sales of taxable bags.
III. Application of Local Option Meals Tax To Sales Governed by the Ordinance
Legislation enacted in 2009 established a local option sales tax on meals, which is found in G.L. c. 64L. See St. 2009, c. 27, §§ 51, 52, 60, 154, and 156. 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 tax is imposed in addition to the 6.25% state sales tax on meals.
Although bags subject to the ordinance are not themselves meals, an establishment must collect the local option sales tax on meals on sales of the bags if such sales are reported on a meals tax return. See section IV of this TIR for methods of reporting applicable tax due.
IV. Tax Collection, Remittance, Reporting and Filing Requirements
a. Sales Tax Generally
The Commissioner of Revenue requires vendors to report the state sales tax due on their sales tax returns in accordance with the rules set forth in G.L. c. 62C, § 16, and Department of Revenue regulation, 830 CMR 62C.16.2 (Sales and Use Tax Returns and Payments). Retail establishments that are not subject to meals tax should include the price of the bags sold in their taxable sales on their monthly, quarterly, or annual sales tax returns. (Form ST-9 series), as applicable.
b. State/Local Sales Tax on Meals
Retail establishments, such as restaurants, that are subject to the state sales tax on meals under G.L. c. 64H must file "Sales Tax on Meals, Prepared Food and All Beverages Return" (Form ST-MAB-4). A vendor of meals must file returns and, where applicable, pay the local tax imposed by G.L. c. 64L to the Commissioner at the same time and in the same manner as the sales taxes due the Commonwealth. G.L. c. 64L, § 2(a). These general requirements are set forth in G.L. c. 62C, § 16. Although bags subject to the ordinance are not themselves meals, vendors of meals may, for ease of administration and convenience, elect to include the charge for the bags in the sales price of the meals for purposes of reporting their total taxable receipts on their meals tax returns, or, alternatively, may elect to report the sales price of the bags on their sales tax returns.
To the extent that checkout bag charges are included on meals tax returns, a vendor of meals must collect and remit any applicable local option meals tax imposed under G.L. c. 64L from the purchaser at the same time and in the same manner as the sales tax due to the Commonwealth. G.L. c. 64L, § 2; G.L. c. 62C, § 16. For further rules governing a vendor's obligations with respect to the reporting and collection of the local option meals tax, refer to TIR 09-13.
c. Registration and Filing Requirements
Vendors can register, file and pay taxes online using the Department’s system, MassTaxConnect. For additional information about electronic and filing payment requirements, including mandatory requirements for filings made on or after January 1, 2016, see TIR 15-9.
/s/Mark E. Nunnelly
Mark E. Nunnelly
Commissioner of Revenue
March 30, 2016