Use Tax on Out-of-State Purchases

A Massachusetts use tax of 6.25% is due on taxable purchases of tangible personal property purchased for use in Massachusetts on which no Massachusetts sales or use tax was paid. Purchases include, but are not limited to, purchases made out-of-state, on the Internet or from a catalog, where no Massachusetts sales tax was paid. Examples of taxable items include antiques, appliances, artwork, books, carpet, CDs and DVDs, computers, electronics, furniture, jewelry, software, video games and any other item that is not exempt.

The Massachusetts use tax is 6.25 percent of the sales price or rental charge of tangible personal property on which no Massachusetts sales tax was paid, where the property was purchased to be used, stored or consumed in the Commonwealth.

The use tax does not apply where Massachusetts sales tax has been collected or where the transaction is exempt from sales or use tax by statute (e.g., an item of clothing with a sales price of $175 or less is exempt).

Tangible personal property need not be used exclusively or even primarily within Massachusetts for the use tax to apply. Tangible personal property delivered, shipped, or brought into Massachusetts within six months after purchase is presumed to be purchased for use, storage, or other consumption in Massachusetts until the contrary is established. A taxpayer can rebut this statutory presumption by presenting sufficient evidence to establish that the property shipped or brought into Massachusetts was not purchased for storage, use or other consumption in Massachusetts.

Credit for Tax Paid to Other States:
Generally, a taxpayer who pays a sales or use tax to another state or territory of the United States on merchandise to be used in the Commonwealth is entitled to a credit against the Massachusetts use tax up to the amount of the 6.25 percent Massachusetts sales and use tax. The credit is allowed for sales or use tax paid to another state only if that state has a corresponding credit similar to the Massachusetts credit.

Computation for Use Tax is determined by one of three methods:

  • Method #1 for residents, by completing the Form 1, Line 33 Worksheet - Use Tax Due on Out-of-State Purchases for all purchases;
  • Method #1 for part-year residents, by completing the Form 1-NR/PY, line 38 Worksheet - Use Tax on Out-of-State Purchases on purchases made while a Massachusetts resident for all purchases;
  • Method #2 for residents and part-year residents, by using the alternative method based on a "safe harbor" amount of use tax for purchases of items with a sales price less than $1,000. if this method is used, taxpayers must still fill out the worksheets for purchases of items over $1,000;
  • Method #3 for residents and part-year residents, by filing a Form ST-11, Individual Use Tax Return pdf format of    st_11.pdf  .

Note: Use tax does not apply to nonresidents.

Method #2 - Alternative "Safe Harbor" Method of Filing:

Taxpayers may use a schedule to identify a "safe harbor" amount of use tax that they can self-assess when filing their income tax returns. The schedule is based on the taxpayer's Massachusetts adjusted gross income. This method can be used in lieu of computing the actual amount due with respect to such purchases on the Form 1, line 33 or Form 1-NR/PY, line 38 worksheet. Taxpayers electing to satisfy a use tax liability by estimating it shall calculate the liability in accordance with the schedule below. This method, however, only applies to purchases of items with a sales price less than $1,000. 

MA AGI Per Return:Use Tax Liability
$0 - $ 25,000$0.00
$25,001 - $ 40,000$20.00
$40,001 - $ 60,000$31.00
$60,001 - $80,000$44.00
$80,001 - $100,000$56.00
Above $100,000Multiply MA AGI by .000625

Purchases of Items with a Sales Price of $1,000 or more:
The estimated liability is only applicable to purchases of any individual item having a total sales price of less than $1,000. These purchases are not part of the safe harbor estimate and must be calculated separately For each taxable item purchased at a sales price of $1,000 or greater, the actual use tax liability for each purchase must be added to the amount of the estimated liability derived from the above table.

Example: Massachusetts adjusted gross income = $55,000
"safe harbor" amount from schedule= $31
New stove = $2,600 x .0625= $163
Total Use Tax= $194

Voluntary Contributions

Taxpayers may contribute any amount they choose to one or more charities directly on their Massachusetts tax returns. These amounts are added to the tax. They increase the amount of payment or reduce the amount of refund.

Voluntary contributions to the following fund will not change the tax or reduce a refund:
(This election is made on page 1 of the tax return, above the Filing Status line)

  • Massachusetts State Election Campaign Fund provides limited public financing for campaigns of eligible candidates for statewide and elective office. A taxpayer, and spouse if filing jointly, may voluntarily contribute $1 each to this fund.

Voluntary contributions to the following four funds will either increase a tax liability or decrease a refund:
(These elections are made on page 3 of the tax return, below Income Tax after Credits line)

  • Endangered Wildlife Conservation: The Natural Heritage and Endangered Species Fund is administered by the Division of Fisheries and Wildlife. Contributions to this Fund are used to protect and restore rare and endangered wildlife and plants, and their habitats. The Fund has helped restore and conserve in the Commonwealth populations of Bald Eagle, Hessel's Hairstreak Butterfly, the Redbelly Turtle and the Plymouth Gentian;
  • Organ Transplant Fund is administered by the Massachusetts Department of Public Health. Contributions to this Fund assist patients with the costs of medications without which they might lose their transplanted organs;
  • Massachusetts AIDS Fund is administered by the Massachusetts Department of Public Health. Contributions to this Fund are used for research, experimental treatment and education related to Acquired Immune Deficiency Syndrome (AIDS). Massachusetts residents living with AIDS receive experimental treatment through clinical trials which are wholly supported with this Fund. The Fund also educates people with AIDS about treatment options and how to gain access to medication and experimental treatment;
  • Massachusetts United States Olympic Fund. Contributions to this fund assist Massachusetts residents in paying all or part of any costs associated with the development, maintenance and operation of the U.S. Olympic Team participating in the Olympics and the United State Paralympic Team participating in the Paralympics; and
  • Massachusetts Military Family Relief Fund. Recent legislation enables taxpayers to make voluntary contributions on their Income tax returns to the newly established Massachusetts Military Family Relief Fund. This fund is administered by the Friends of Massachusetts National Guard and Reserve Families. Contributions to this fund are used to help members of the Massachusetts National Guard and Massachusetts residents who are members of the reserves of the armed forces of the United States and who have been called to active duty after the September 11, 2001 terrorist attacks, and their families, to defray the costs of food, housing, utilities, medical services, and other expenses.

Caveat: for these four funds, if the return shows a net tax due, the voluntary contributions may be made only if paid in full along with the net tax due when the return is filed.

All of the following filing methods allow for voluntary contributions:

  • Electronic Filing;
  • Online Filing; and
  • Paper - Form 1 and Form 1-NR/PY.

Receipts for Voluntary Contributions to Charitable Funds:
Copies of tax returns serve as receipts of contribution to the designated charity since returns are signed under penalties of perjury. If taxpayers request receipts for voluntary contributions, they should mail in or fax to CSB signed requests and CSB will provide line item detail verification of any contribution(s) made on their tax returns. Taxpayers may request receipts of tax returns that were changed during processing.

DOR Adjustment issues:
If there is an increase in liability at the time the return is posted, the voluntary contributions will be reduced to reflect the increase. If there is a decrease in liability, the amount of voluntary contribution remains the same, and the balance is refunded.

The priority for applying an overpayment is as follows:

  • credit forward to the estimated tax account;
  • voluntary contributions;
  • refund.

If there is an overpayment that is sufficient to cover only a portion of the entire contribution designated on the tax return, the following order would apply:

  • Wildlife;
  • Organ Transplant;
  • AIDS Fund;
  • Olympic Fund;
  • Military Fund.

Examples of voluntary contributions with a change in tax in processing:

1. Return shows $70 overpayment:
$50 for voluntary contributions;
$20 requested refund.
DOR reduces overpayment from $70 to $60.

Result: $50 is applied to the designated charities in priority order and refund is reduced to $10.

2. Return shows $170 overpayment.
$150 for voluntary contributions;
$20 requested refund
DOR reduces overpayment from $170 to $150.

Result: $150 is applied to the designated charities and the refund is reduced to $0.

3. Return shows $90 overpayment.
$70 for voluntary contributions;
$20 requested refund
DOR reduces overpayment from $90 to a tax due of $30.

Result: $70 contribution is reduced to $0. No overpayment, no contribution and taxpayer is billed for $30.

4. Return shows $120 overpayment:
$40 overpayment applied to the following year estimated tax account;
$50 listed as voluntary contributions;
$30 requested refund.
DOR reduces overpayment from $120 to $50.

Result: $40 overpayment is applied to the following year estimated tax account and the remaining $10 is applied to the designated charities. There will be no refund.

5. Taxpayer pays $110 with return:
$80 for net tax due;
$30 listed as voluntary contributions.
DOR increases net tax due to $90

Result: $10 for voluntary contributions is applied to increase in net tax due. Remaining $20 is applied to the designated charities. 


Military Spouse Wage Withholding - The Military Spouses Residency Relief Act (P.L. 111-97 or "MSRRA")

For taxable years beginning with 2010, a nonresident servicemember's qualifying spouse whose wages are exempt from Massachusetts personal income tax may claim an exemption from Massachusetts withholding tax. A military spouse who qualifies for Massachusetts wage exemption must complete Form M-4-MS, Annual Withholding Tax Exemption Certificate for Military Spouse pdf format of    M_4_MS.pdf  , and provide required documentation.

The Form M-4-MS must be validated on an annual basis. The military spouse must show continued eligibility for the exemption. Scenarios that will cause the spouse to no longer be eligible include:

  • Servicemember leaves the service;
  • Divorce;
  • Voluntary physical separation due to duty changes - the service member's orders move him or her to a location outside Massachusetts where the spouse is allowed to join him or her but chooses not to; or
  • Spouse commits an action that clearly establishes Massachusetts as his or her state of domicile.

Military Spouse 2013 Wage Withholding - Filing for Refund:
For taxable year 2013, a service member's spouse who had Massachusetts personal income tax withheld and who qualifies for exemption from Massachusetts tax must file a Form 1-NR/PY Massachusetts Nonresident Income Tax Return pdf format of    Form 1-NR/PY  , to claim a refund. For this purpose, the Form 1 NR/PY return must be paper filed; no e-file returns are allowed. The qualifying spouse must write "MSRRA," across the top of the Form 1 NR/PY and attach copies of the following:

1. Military Spouse ID card.
2. Department of Defense Form 2058, State of Legal Residence Certificate – "legal residence for purposes of withholding state income taxes from military pay;"
3. LES, Leave and Earnings Statement of service member; and
4. Service member's current military orders assigning such service member to a post of duty in or near Massachusetts.

The qualifying service member's spouse must pay tax to the state of domicile for 2013, to the extent required by the state of domicile.

Earned Income Credit Not Allowed. A nonresident spouse who qualifies for exemption from Massachusetts tax under the MSRRA does not qualify for the Massachusetts earned income credit applicable to nonresidents since, under the MSRRA, "income for services performed by the spouse of a servicemember is not deemed to be income for services performed or from sources within Massachusetts. In order to claim the earned income credit, a nonresident taxpayer must have "earned income . . . from Massachusetts sources."

How to complete the Form 1 NR/PY for tax year 2013 to receive a refund of withholding. The spouse must include the exempt wages that were subject to withholding on line 5 of Form 1 NR/PY, making a subtraction of such wages on Schedule Y, line 4.

Examples, Refund of 2013 Wage Withholding

Example 1.
Carol's spouse, Robert, is a servicemember on active duty whose military orders assign him to a military base in Massachusetts. The domicile of both Carol and Robert is Georgia. For the year 2013, Robert has military income (exempt from Massachusetts tax under the SCRA) that is subject to tax in Georgia, and Carol has wages from employment in a store located in Massachusetts. Carol and Robert have no other income subject to tax. Carol's employer withheld Massachusetts personal income tax from her wages and issued a W-2 for 2013 showing the total Massachusetts tax withheld.

As a qualifying military spouse, Carol files a paper 2013 Form 1 NR/PY and writes across the top "MSRRA." She enters the following on:

  • Form 1 NR/PY, line 3 , Carol's total income from the federal return (and, for a joint return, Robert's military wages would be included);
  • Form 1 NR/PY, line 5, Carol's W-2 wages on line 5 of Form 1 NR/PY;
  • Form 1 NR/PY, line 14, Nonresident deduction and exemption ratio:
    • lines 14(a) - 14 (d), 0;.
    • line 14(e), Carol's W-2 wages (and, for a joint return, Robert's military wages);
    • line 14(f), enter amount from line 14(e);
    • line 14(g), the ratio will be zero (0.00).

To deduct Carol's W-2 wages from "Massachusetts source income:

  • Schedule Y, lines 4 and 16, Carol's W-2 wages from "Massachusetts source income;"
  • Form 1 NR/PY, lines 19 & 20, Carol's W-2 wages from "Massachusetts source income;"
  • Form 1 NR/PY, lines 41 and 48, the amount of Massachusetts withholding from Carol's W-2 wages;
  • Form 1 NR/PY, lines 49 & 51 as the refund amount.


Example 2.
The facts are the same as example 1 for Carol and Robert, except Carol also has lottery winnings. Carol has Massachusetts W-2 wages of $10,000 (exempt from Massachusetts tax under the MSRRA) and Massachusetts lottery winnings of $15,000 (not exempt from Massachusetts tax under the MSRRA), and Robert has military wages of $30,000 (exempt from Massachusetts tax under the SCRA).

As a qualifying military spouse, Carol files a paper 2013 Form 1 NR/PY and writes across the top "MSRRA." She enters the following on:

  • Form 1 NR/PY, line 3 , Carol's total income from the federal return, $25,000 (and, for a joint return, Robert's military wages of $30,000 would be included for a total $55,000);
  • Form 1 NR/PY, line 5, Carol's W-2 wages of $10,000 on line 5 of Form 1 NR/PY;
  • Form 1 NR/PY, line 10(b), Carol's lottery winnings of $15,000;
  • Form 1 NR/PY, line 12, Carol's total income of $25,000;
  • Form 1 NR/PY, line 14, Nonresident deduction and exemption ratio:
    • lines 14(a) & 14 (d), Carol's lottery wages of $15,000;
    • line 14(e), Carol's W-2 wages of $10,000 and lottery winnings of $15,000, total $25,000 (and, for a joint return, Robert's military wages of $30,000 would be included);
    • line 14(f), enter amount from line 14(e); $25,000 ($55,000 if MFJ);
    • line 14(g), the ratio will be .60 ($15,000/$25,000; or .2727 if MFJ ($15,000/$55,000)

To deduct Carol's W-2 wages from "Massachusetts source income:

  • Schedule Y, lines 4 and 16, Carol's W-2 wages from "Massachusetts source income;"
  • Form 1 NR/PY, lines 19 & 20, Carol's W-2 wages from "Massachusetts source income;"
  • Form 1 NR/PY, lines 41 and 48, the amount of Massachusetts withholding from Carol's W-2 wages;
  • Form 1 NR/PY, lines 49 & 51 as the refund amount.


Note: The FICA deduction for Carol's wage is not allowed as the wages are excluded on Schedule Y.


Promoters and Other Persons Making Payments for Events

In general, entertainers, participants in certain athletic events and other individuals who are compensated for appearances or events in the Commonwealth are subject to tax on their earnings attributable to such activities.

DOR is authorized to require persons other than employers to
:
 

  1. deduct and withhold taxes from payments made by such persons to residents, nonresidents and part-year residents of Massachusetts;
  2. file withholding returns as prescribed by DOR; and
  3. pay over to DOR, or to a depositary designated by DOR, the taxes so required to be deducted and withheld.

Exception for certain payments of $10,000 or less:
Any corporation, foundation, organization or institution that is exempt from federal taxation under § 501(c)(3) of the Internal Revenue Code is not required to withhold taxes from persons who are not employees except where payments made by the exempt person for a particular event exceed $10,000.

Promoters and other persons making payments for events in the Commonwealth must register online for withholding tax at WebFile for Business ("WFB") at www.mass.gov/dor. The promoter or other person making event payments must withhold state income taxes at the rate of 5.3% from the entertainer, athlete, or other event participant, and remit those taxes with the appropriate form in a timely manner. For purposes of the withholding requirement for event payments, payments subject to withholding include, among other things, amounts paid in connection with a performance, an entertainment or athletic event, a speech or a seminar.

The new withholding law is not restricted to promoters and similar persons. At a future time, DOR may require withholding under G.L. c. 62B, s. 2 for persons other than those making payments for events. DOR will announce prospectively any additional withholding obligations and requirements.


Where to Report on Original Tax Return; What to Enclose:

for Use Tax, out-of-State Purchases - 3 methods
for Voluntary Contributions
  • Enter the amounts on either Mass Form 1, Line 32 or Form 1-NR/PY, Line 37.

Massachusetts References:


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