Advance Payment Frequently Asked Questions

Beginning April 2021, taxpayers who had more than $150,000 in total liability for certain tax types from the previous calendar year are required to make an advance payment before the related tax return is due. Please review the frequently asked questions to learn more about the advance payment requirements.

Updated: December 20, 2021

Table of Contents

FAQs

Who is required to make advance payments? (Updated 12/17/21)

Taxpayers who file a monthly return with over $150,000 in total tax liability in the previous calendar year for the tax types listed below are required to make advance payments.  

Sales and Use Tax Sales and Use Tax - Marketplace Facilitators
Sales Tax on Meals Room Occupancy Excise Tax
Sales Tax on Telecommunications Marijuana Retail Taxes
When is the advance payment due and how much do I have to pay? (Added 12/17/21)
 

The advance payment is due on the 25th of the month. The amount that must be paid is either (1) the “tax collected,” which generally is the tax on taxable gross receipts or total taxable sales/rents, from the 1st through the 21st of that same monthly filing period or (2) at least 80% of the prior month’s total liability, provided that there was such a liability in the prior month.  

The remaining tax for the month will be due with the tax return, 30 days after the close of the filing period.

Is a return or voucher required to be filed with the advance payment? 
 

No. The advance payment will be a “return payment” made on the appropriate monthly tax period. No return or voucher is required at the time the advance payment is submitted. 

How will I make my advance payment on MassTaxConnect?
 

All taxpayers may use ACH debit to make their advance payments on MassTaxConnect. After login:        

  • Locate the account type and select the Returns hyperlink. 
  • Select the Period you want. 
  • Select the Make a Payment hyperlink
  • Select Return Payment in the payment type dropdown.

Video tutorial: How to Make an Advance Payment on MassTaxConnect

Can I make my advance payment through ACH Credit?
  

ACH credit is available for sales/use tax and sales tax on services. If you are currently making ACH credit payments through your bank, you will be able to make your advance payment using ACH Credit also, following the same process you use currently.

Can I use the Meals Tax Bulk File option to make Advance Payments?
 

Yes. The Meals Tax Bulk File format accommodates filing both Payments and Returns. These can be filed together or separately, by using the Y/N Flags within the file as follows:

To make an Advance Payment for Meals Tax, you should set the

  • Return Flag (at position 57) to “N” and the
  • Payment Flag (at position 166) to “Y” for each location.

The Payment will be processed, and the return values will be ignored.

To file the Monthly Return for Meals Tax, you should set the

  • Return Flag (at position 57) to “Y”, and the
  • Payment Flag (at position 166) to “Y” if making a payment for the remaining Amount Due. Otherwise, Payment would be “N”.

The values of the return should reflect the entire period, but the payment amount should reflect the balance due after subtracting out any advance payment made.

How will my advance payment be reflected on my tax return? (Updated 12/17/21)
 

Currently the tax returns where an advance payment is required do not have a line showing the advance payment. For the April 2021 through December 2021 returns, when you file your tax return on MassTaxConnect, you should deduct the amount of your advance payment from the amount shown as the balance due on the payment screen and submit a payment for the difference.

Starting with the January 2022 return, any payment previously submitted for that month will be automatically reflected as a line item on your tax return on MassTaxConnect. This amount will include the amount of your advance payment. The amount reflected in the line will be automatically subtracted from your tax due to calculate the balance due with the return.

Do I have to include the use tax I owe on purchases in my advance payment? (Updated 12/17/21)
 

No. You should not include use tax on purchases in your advance payment. Your use tax on purchases must be reported and paid when the return is filed. In addition, vendors should not include the use tax they report on purchases for purposes of calculating 80% of the total liability for the prior month.

Do I have to include any additional taxes and fees in my advance payment? (Updated 12/17/21)
 

Yes. If you are liable for any additional taxes (e.g., the local option meals tax, room occupancy excise or marijuana excise) or fees (e.g., the Convention Center Financing Fee, Cape Cod and Islands Water Protection Fund Fee, and the Community Impact Fee and Tourism Destination Marketing District Fee) you must include these amounts in determining your advance payment.

How does a tobacco retailer that prepays sales tax determine their advance payment? (Updated 12/17/21)
 

The advance payment is based on either (1) the total tax liability from the 1st through the 21st of the monthly filing period or (2) at least 80% of the prior month's total liability. A tobacco retailer that has prepaid tax to a wholesaler may reduce the amount of the advance payment either by the amount that was already paid from the 1st through the 21st of that same monthly filing period where the advance payment is based on the current month’s tax liability, or the total amount claimed on the prior month’s return if basing the payment on 80% of the prior month.  

How does a taxpayer that currently determines tax liabilities when they bill their customers determine their advance payment? (Updated 12/17/21)
 

For purposes of calculating the advance payment, a taxpayer that currently determines tax liabilities when they bill their customers should determine the tax liability from the 1st through the 21st of the month using their current method of accounting for the tax types subject to the advance payment requirement, so long as it is the same method used for purposes of each monthly return required to be filed. This same methodology applies generally where a taxpayer is basing its payment on 80% of the prior month’s total liability.

For example, a utility company reports gross receipts from taxable sales on its Massachusetts sales and use tax return based on the date the customer is billed. Assuming all its customers are billed on the 30th day of the month, it does not have any receipts subject to tax from the 1st through the 21st of the month, and therefore has no advance payment obligation. However, if it bills the customer on the 15th of the month, it must include those receipts in calculating its tax liability from the 1st through the 21st of the month and make an advance payment on the 25th of the month.

My business operates 6 restaurant locations and collected approximately $30,000 in meals tax for each restaurant location in the previous year. Am I required to make an advance payment based on the previous year total meals tax collected or should I consider each location separately? 
 

If all locations are part of a single business, you are required to make an advance payment for all 6 locations because the total previous year tax liability for all locations together is more than $150,000. 

My business operates a hotel that pays room occupancy tax and meals tax.  In the previous year, the hotel collected more than $150,000 in room occupancy taxes. At the onsite restaurant, the business collected $70,000 in meals tax in the previous year. Am I required to make an advance payment for both room occupancy taxes and meals tax?
 

No. Each tax type is considered separately. You are required to make an advance payment for the room occupancy taxes but not for meals tax.

I am a vendor who reported use tax on purchases on my sales and use tax return last year. Do I include the use tax I reported on purchases in the previous year for purposes of calculating my total previous year sales and use tax liability?
 

No. Vendors who reported use tax are not required to include use tax on purchases for purposes of calculating their total previous year total tax liability to determine whether they are over the $150,000 threshold.

If I was not in business for all 12 months of the year, how do I determine if I’m required to make an advance payment?
 

If your total tax liability was over $150,000 for the period you were operating during the previous calendar year, you are required to make advance payments in the next year. If your total tax liability for the previous year was less than $150,000 for the months you were operating, you are not required to make advance payments in the following year. 

If I was not filing and paying for most of 2020 or 2021 due to the COVID relief extension, how do I determine if I’m required to make an advance payment?
 

If your total tax liability was over $150,000 from Jan 1, 2020 through December 31, 2020, even if returns were not filed and tax was not paid you are subject to the advance payment requirement for 2021. Likewise, if your tax liability was over $150,000 from January 1, 2021 through December 31, 2021, you are subject to the advance payment requirement for 2022.

If I’m a new business, am I required to make an advance payment based on estimated future sales?
 

No. If your first obligation to pay one of the taxes subject to the advance payment requirements is in the year your business starts, you are not required to make advance payments for the remainder of that year. Your requirement for the following year will be based on your tax liability from the previous year. 

Am I allowed to estimate the advance payment amount based on the prior month or the previous year? (Updated 12/17/21)

No. The advance payment must be based on your actual tax liability from the 1st through the 21st of the month or at least 80% of the prior month’s actual total liability.  

Is there a penalty for not making an advance payment? 

Yes. A 5% penalty may be imposed if the advance payment made on the 25th is less than the amount required to be paid. The penalty will be imposed on the amount of the underpayment. If the advance payment is at least 70% of the total liability for the month, no penalty will be imposed. 

Can my advance payment be less than the 70% threshold? (Updated 12/17/21)

Yes. If your actual tax liability through the 21st of the month or at least 80% of the prior month’s total liability is less than 70% of the total liability for the month, your advance payment requirement would be less than 70%. If you pay an amount equal to or greater than the lesser of those two amounts by the 25th of the month there is no underpayment, so no penalty will be imposed.

Will Massachusetts automatically calculate a penalty based on the difference between the advance payment amount and the total tax liability for the period using the 70% threshold? 

No. Massachusetts will not automatically calculate a penalty based on the difference between the advance payment amount and the total liability for the period using the 70% threshold.

If I underpay the advance payment can my penalty be waived for reasonable cause? (Updated 12/17/21)
 

Yes. Where the advance payment is less than the actual tax liability through the 21st of the month or at least 80% of the prior month’s total liability, and less than 70% of the total due for the month, your penalty can be waived if you can show the failure to timely pay was due to reasonable cause.

For filing periods from April 2021 through December 2021, the Department presumed that reasonable cause existed for the waiver of any underpayment penalty where the taxpayer made an advance payment on or before the 25th that was equal to 80% or more of the taxpayer’s total tax or excise due for the immediately preceding month if there was a liability in the prior month. For example, DOR presumed that reasonable cause existed if a taxpayer made an advance payment on April 25, 2021 that was 80% of their March 2021 tax liability.

Although this reasonable cause waiver expired at the end of 2021, starting with the December 2021 return the advance payment due is either your actual tax liability through the 21st of the month or at least 80% of the prior month’s total liability.

The return asks for a self-assessed penalty if one applies, how do I determine that? (Updated 12/17/21)
 

Starting with the January 1, 2022 return, you will be able to self-assess an advance payment penalty when the amount paid by the 25th is less than the tax liability from the 1st through the 21st or less than 80% of the prior month’s total liability. The Advance Payment Self-Assessed Penalty worksheet will help you to make that determination. It also contains some examples of scenarios that can be helpful.

I am a vendor who reports use tax on purchases on my sales and use tax return. Do I include the use tax I report on purchases for purposes of calculating 70% of the total due for the month? (Updated 12/17/21)
 

No. Vendors should not include the use tax they report on purchases for purposes of calculating 70% of the total liability for the month.

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