In November 1986, “An Act Phasing Out the Surtax on the State Personal Income Tax and Limiting State Tax Revenue Growth to the Level of Growth in State Wages and Salaries” was approved by the voters of the Commonwealth. On December 4, 1986, it became law as Chapter 555 of the Acts of 1986, which added Chapter 62F to the Massachusetts General Laws.
As shown below, the history of tax legislation related to Chapter 555 is complex.
On November 8, 1975, Chapter 684 of the Acts of 1975 became law and imposed, beginning in calendar year 1975, a 7.5% surtax.
In September 1985, the law that was proposed by initiative petition and that ultimately became Chapter 555 of the Acts of 1986 was drafted by the Citizens for Limited Taxation (CLT) and the Massachusetts High Technology Council, and on December 4, 1985, the signatures necessary for the initiative petition to become a legislative referendum were filed with the Secretary of the Commonwealth.
On December 18, 1985, Chapter 593 of the Acts of 1985 repealed the 7.5% surtax imposed by Chapter 684 of the Acts of 1975 and imposed a 3.75% surtax for calendar year 1986.
On January 3, 1986, the initiative petition was introduced as a legislative referendum (H4004).
On May 6, 1986, the initiative petition was rejected in the House of Representatives. It was not acted upon in the Senate by the May 7, 1986 deadline.
On August 7, 1986, sufficient additional signatures were collected by CLT, and the initiative petition was submitted to the Secretary of the Commonwealth for placement on the November 4, 1986 state election ballot and became known as Question Number 3: “Limiting State Tax Revenue Increases.”
On October 25, 1986, Chapter 488 of the Acts of 1986 repealed the 3.75% surtax imposed by Chapter 593 of the Acts of 1985 for calendar year 1986 and imposed controls over the growth of state revenue. On November 4, 1986, the electorate voted in favor of limiting the growth of state tax revenues, repealing the 7.5% surtax of Chapter 684 of the Acts of 1975 and imposing a new 3.75% surtax for calendar year 1986.
On December 4, 1986, the Secretary of the Commonwealth certified the initiative petition as Chapter 555 of the Acts of 1986 (An Act Phasing Out the Surtax on the State Personal Income Tax and Limiting State Tax Revenue Growth to the Level of Growth in State Wages and Salaries).
On December 9, 1986, Chapter 577 of the Acts of 1986 became effective immediately as an emergency law and repealed all surtaxes retroactively, beginning January 1, 1986.
On July 16, 1988, Chapter 163 of the Acts of 1988 authorized Barnstable County to enact a county deeds excise not to exceed the excise tax imposed by the Commonwealth.
On June 30, 1989, Chapter 193 of the Acts of 1989 provided for a temporary increase to the excise deeds rate set to expire on June 30, 1992. It stipulated that 85% of the increase in receipts would be retained by the county in which it was accrued and that 15% of the increase in receipts would be deposited in the Commonwealth’s County Correction Fund. Section 2 of Chapter 61 of the Acts of 2009 repealed Section 13 of Chapter 64D of the General Laws.
On October 27, 1989, Chapter 448 of the Acts of 1989 became effective immediately as an emergency law and extended the reporting date for the filing of certain financial statements for the Commissioner of Revenue (September first) and the State Auditor (third Tuesday of September).
On March 9, 1993, Section 42 of Chapter 19 of the Acts of 1993 amended and extended Chapter 193 of the Acts of 1989’s temporary deeds excise rate increase set to take effect on July 1, 1992.
On July 1, 1993, Section 127 of Chapter 64K of the Acts of 1993 became effective and imposed a stamp tax on the possession of controlled substances.
On July 27, 1995, Chapter 81 of the Acts of 1995 was enacted, amending Chapter 63 of the General Laws, which provides for the taxation of financial institutions doing business in Massachusetts.
On June 30, 1996, Chapter 151 of the Acts of 1996 became effective and abolished Franklin County as of July 1, 1997. Deed excises previously collected by the county were thereafter collected by the Commonwealth.
On July 11, 1997, Chapter 48 of the Acts of 1997 became effective and abolished Middlesex County immediately and Hampden and Worcester Counties as of July 1, 1998. Deed excises previously collected by the counties were thereafter collected by the Commonwealth.
On November 17, 1997, Chapter 152 of the Acts of 1997 became effective and imposed, in addition to the excises levied under Chapter 64G, a convention center financing fee at the rate of 2.75% upon the transfer or occupancy of any rooms in any hotel or motel in the cities of Boston, Cambridge, Springfield, and Worcester, as well as a 5% surcharge on the purchase price of any ticket for a sightseeing tour and a $10 surcharge on each vehicular rental transaction contract in the City of Boston, $1 of which is to be paid to the City of Boston, and a $2 per day surcharge for parking in a facility built in conjunction with an authorized convention project in the cities of Boston, Springfield, and Worcester. Chapter 45 of the Acts of 2001 added the convention center financing fee to the cities of Chicopee and West Springfield. Except for the $1 vehicular rental surcharge that is paid to the City of Boston, these revenues are includable as state tax revenues as defined in Chapter 555. For fiscal year 2019, net state tax revenue included $103,369,480 in convention center financing fees for room occupancy; $17,001,280 in convention center surcharges; and $43,826,009 in taxes imposed on sales of meals, beverages, and other tangible property or services.
On July 21, 1998, Chapter 175 of the Acts of 1998 was enacted, amending Chapter 151A of the General Laws by inserting Section 14L and imposing a Workforce Training Contribution of 0.075% on wages. The Director of Workforce Development is required to adjust the rate of contribution (consistent with federal law) so that the total amount of the contribution in a year substantially equals $18 million. The contributions are to be deposited in the Workforce Training Fund, a separate fund on the books of the Commonwealth, codified in Section 2RR of Chapter 29 of the General Laws, and are to be used for workforce training. Contributions deposited in the Workforce Training Fund are subject to appropriation. Chapter 175 also repealed Section 14L as of December 31, 2001 and increased the amount of all personal income tax exemptions. On December 30, 1999, Chapter 172 of the Acts of 1999 was enacted, amending the repeal of Section 14L of Chapter 151A to December 31, 2002. Effective July 1, 2002, Section 159 of Chapter 184 of the Acts of 2002 further amended Chapter 172 of the Acts of 1999 by extending the repeal to December 31, 2005. On June 30, 2005, Section 8 of Chapter 45 of the Acts of 2005 further amended Chapter 172 of the Acts of 1999 by extending the repeal of Section 14L of Chapter 151A to December 31, 2008. Effective June 24, 2006, Section 78 of Chapter 123 of the Acts of 2006 further amended Section 8 of Chapter 45 of the Acts of 2005 by extending the repeal to December 31, 2010. Effective May 22, 2010, Section 33 of Chapter 112 of the Acts of 2010 further amended Section 78 of Chapter 123 of the Acts of 2006 by extending the repeal to December 31, 2012. Effective October 27, 2011, Section 2RR of Chapter 29 was amended by Section 5 of Chapter 142 of the Acts of 2011 to change the designation of the Workforce Training Fund to the Workforce Training Trust Fund. The director of the Department of Career Services may contract with the Commonwealth Corporation to administer the fund. Moreover, as the trustee of the fund, the director of the Department of Career Services, without further appropriation, shall make expenditures from the fund to provide grants to employers, employer groups, labor organizations, and training providers for projects to provide education and training to existing employees and newly hired workers.
On August 31, 1998, Chapter 300 of the Acts of 1998 became effective, transferring Hampshire County’s functions, duties, and responsibilities to the Commonwealth effective September 1, 1998 and abolishing Hampshire County as of January 1, 1999; Essex County as of July 1, 1999; and Berkshire County as of July 1, 2000. On November 16, 1999, Chapter 127 of the Acts of 1999 transferred the Berkshire County and Suffolk County registries of deeds to the Commonwealth effective July 1, 1999. Deeds excises previously collected by Berkshire County were thereafter collected by the Commonwealth.
On December 13, 2000, Chapter 267 of the Acts of 2000 (The Massachusetts Community Preservation Act) became effective, establishing Chapter 44B and authorizing a $20 surcharge on certain fees of the registers of deeds and assistant recorders for instruments left for recording, filing, depositing, registering, or entering, and a $10 surcharge for recording, filing, depositing, registering, or entering a municipal lien certificate.
On April 12, 2006, Chapter 58 of the Acts of 2006 (An Act Providing Access to Affordable, Quality, Accountable Health Care) became effective, establishing Chapter 111M, which required each resident of the Commonwealth who filed a Massachusetts personal income tax return, beginning with taxable year 2007, to designate on their return whether they had health insurance coverage. A resident who had access to affordable health insurance coverage but did not obtain and maintain the coverage, and to whom an exemption did not pertain, was subject to penalties prescribed under Section 2 of Chapter 111M. All penalties assessed and collected under Section 2 were designated for deposit in the Commonwealth Care Trust Fund, established by Section 2OOO of Chapter 29 of the General Laws.
On January 3, 2007, Chapter 422 of the Acts of 2006 (An Act Relative to the Worcester DCU Arena and Convention Center) became effective and designated receipts from excises levied under Chapters 64G and 64H (from establishments located in the DCU center finance district) for deposit in a separate fund titled the City of Worcester DCU Capital Improvement Fund solely to pay or provide for the principal of, and premium and interest on, all bonds or notes issued by the City to finance DCU center improvement costs authorized under the act. In addition, the act provides that if, in any fiscal year, total revenues deposited in the DCU Capital Improvement Fund are insufficient to pay or provide for the principal of, and the premium and interest payable on, all bonds and notes, the City may impose an administrative parking surcharge in an amount not to exceed $3 per day upon any vehicle that parks during the two-hour period before the starting time of any event at the DCU center, or a facility betterment fee of not more than $3 on each ticket to each event held at the DCU center, or any combination thereof as determined by the city council. During fiscal year 2019, excise tax receipts collected and deposited in the DCU Capital Improvement Fund totaled $1,503,766 from room occupancy taxes and $842,540 in taxes imposed on sales of meals, beverages, and other tangible property or services.
On July 3, 2008, Chapter 173 of the Acts of 2008 (An Act Relative to Tax Fairness and Business Competitiveness) was enacted and put into effect various corporate excise rate cuts to be implemented over a period of years for business corporations (Section 39 of Chapter 63), financial institutions (Section 2 of Chapter 63), S corporations (Section 32D of Chapter 63), and financial institutions that operate as S corporations (Section 2B of Chapter 63). The applicable rate reductions were effective for taxable years beginning on or after January 1, 2009. The act, under Sections 48 and 101, also amended Section 32B of Chapter 63 by allowing for combined reporting for multi-state corporate filers for the purpose of taxing corporations that operate both within and outside the state. This change also became effective for tax years beginning on or after January 1, 2009.
On August 8, 2008, Chapter 302 of the Acts of 2008 amended Section 6 of Chapter 64C by adding that a portion of cigarette tax revenues paid under Section 6 of that chapter would be credited to the Commonwealth Care Trust Fund, established in Section 2OOO of Chapter 29. According to Section 6 of Chapter 64C, the amount credited to the fund beginning in fiscal year 2011 and every fiscal year thereafter would be equal to the monthly cigarette tax revenues received in each fiscal year multiplied by the percentage of cigarette tax revenues in 2010 that were credited to the fund.
On July 31, 2009, Chapter 523 of the Acts of 2008 (An Act Relative to the Operation of Low-Speed Motor Vehicles) became effective and directed the Massachusetts Registry of Motor Vehicles (RMV) to begin registering two classes of motor vehicles not previously required to be registered in Massachusetts. As of July 31, 2009, the RMV requires low-speed vehicles and limited-use vehicles to be registered as motor vehicles. In addition, since these vehicles are considered motor vehicles, casual and isolated sales of these vehicles are not exempt from the use tax (Section 7 of Chapter 64I), which therefore must be paid on the transfer of these vehicles unless the purchaser is the spouse, mother, father, brother, sister, or child of the seller, or another exemption applies. As a result of this change, tax is now required and paid directly to the RMV for these sales.
On August 1, 2009, Sections 53, 55 through 57, and 59 of Chapter 27 of the Acts of 2009 amended Chapter 64H (sales tax) and Chapter 64I (use tax) by changing the rate of tax for sales and use of tangible personal property and telecommunication services from 5% to 6.25%. The legislation also repealed the existing exemption for alcoholic beverages, including beer, wine, and liquor, sold at retail by amending Section 6(g) of Chapter 64H. However, as a result of a referendum question on the November 2, 2010 ballot, the above law that extended the Massachusetts sales and use tax to alcoholic beverages sold at package stores and liquor stores was repealed, and the sales tax exemption in Section 6(g) of Chapter 64H was reinstated and became effective for sales on or after January 1, 2011.
On August 1, 2009, Section 61 of Chapter 27 of the Acts of 2009 was enacted and amended the General Laws by inserting Chapter 64M (Taxation of Direct Broadcast Satellite Service) and imposing a 5% excise tax on the gross revenues of providers of direct broadcast satellite service to a subscriber or customer in Massachusetts. The tax applies to actual receipts on or after August 1, 2009 and was passed along to subscribers or customers as a separately stated item on their bills. During fiscal year 2019, the Commonwealth collected $8,605,108 from direct broadcast satellite service providers.
On August 6, 2009, Chapter 61 of the Acts of 2009 (An Act Transferring County Sheriffs to the Commonwealth) was enacted. Under Section 2 of the aforementioned act, which became effective on January 1, 2010 and amended Sections 11 through 13 of Chapter 64D of the General Laws, with the exception of Barnstable and Suffolk Counties (which shall transmit all taxes collected under Chapter 64D to the Commonwealth’s General Fund), on the first day of each month, 10.625% of the taxes collected in the counties of the other transferred sheriffs (i.e., Bristol, Dukes, Nantucket, Norfolk, and Plymouth) shall be transmitted to a fund known as the Deeds Excise Fund that shall be maintained separate and apart from other funds and accounts of each county to satisfy the unfunded county pension liabilities and other benefit liabilities of retired employees of the sheriffs’ offices. Beginning in fiscal year 2011, if the minimum obligation2 is insufficient to satisfy the unfunded pension and other benefit liabilities, the county shall retain and transfer to its Deeds Excise Fund an additional amount of the deeds excise collected necessary to meet its annual retirement assessment and to satisfy the unfunded county pension and other benefit liabilities until the minimum obligation is sufficient or until the county has paid the unfunded pension liability in full. Once the liabilities are satisfied, the county shall go back to retaining 10.625%. Further, with regard to the county of Nantucket, an additional 30.552% of the taxes collected shall be transferred to its Deeds Excise Fund on the first of each month through June 1, 2029. If, however, in a fiscal year, the dollar amount that equals 30.552% exceeds $250,000, the excess amount shall be transmitted to the Commonwealth’s General Fund. The remaining percentage of taxes collected under Chapter 64D, including all counties whose governments were abolished by Chapter 34B or another law, but not including the additional excise authorized in Section 2 of Chapter 163 of the Acts of 1988, shall be transmitted to the Commonwealth’s General Fund. During fiscal year 2019, $10,211,842 was collected and retained by the counties required to maintain a Deeds Excise Fund.
On October 1, 2009, Section 60 of Chapter 27 of the Acts of 2009 added a new chapter to the General Laws: Chapter 64L (Local Option Meals Excise). Under this chapter, a city or town that accepted the provisions of this chapter imposed a local sales tax on the sale of restaurant meals originating within the city or town by a vendor at the rate of 0.75% of the vendor’s gross receipts from the sale of restaurant meals. This new local option sales tax is in addition to the 6.25% state sales tax on meals and took effect on the first day of the calendar quarter following 30 days after acceptance by the city or town or on the first day of a later calendar quarter as designated by the city or town. During fiscal year 2019, the Commonwealth collected and returned $142,216,586 to 221 cities and towns that had accepted and imposed this local sales tax.
On October 1, 2009, Sections 51 and 52 of Chapter 27 of the Acts of 2009 became effective and amended Section 3A of Chapter 64G of the General Laws by increasing 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 voted to accept the increased rate. This new rate could be imposed on the first day of the calendar quarter following 30 days after acceptance of the increased rate, or on the first day of a later calendar quarter as designated by the city or town. During fiscal year 2019, the Commonwealth collected and returned a total of $228,914,020 in local option room occupancy excise taxes, which includes 182 cities and towns that also accepted the increased rate.
On November 22, 2011, Chapter 194 of the Acts of 2011 became effective and established expanded gaming in the Commonwealth. Section 16 of the act added a new chapter to the General Laws: Chapter 23K, which established the Massachusetts Gaming Commission and granted the commission the power and authority to implement, administer, and enforce the chapter. Section 55 of the act established daily taxes and an assessment payable by category 13and category 24 licensees as follows:
(a) A category 1 licensee shall pay a daily tax of 25 per cent on gross gaming revenues.
(b) A category 2 licensee shall pay a daily tax of 40 per cent on gross gaming revenue.
(c) In addition to the tax imposed under subsection (b), a category 2 licensee shall pay a daily assessment of 9 per cent of its gross gaming revenue to the Race Horse Development Fund established in section 60.
(d) Taxes imposed under this section shall be remitted to the commission by a gaming licensee the day following each day of wagering.
During fiscal year 2019, the Massachusetts Gaming Commission collected $130,701,550 in daily taxes and assessments.
Chapter 334 of the Acts of 2016, the Regulation and Taxation of Marijuana Act, became effective on December 15, 2016. Section 4 of Chapter 334 created Section 2 of Chapter 64N of the General Laws, which allowed the state to impose a 3.75% excise tax on the sales of marijuana and marijuana products. In addition, Section 3 of Chapter 64N gave an option to cities and towns to impose a local sales tax no greater than 2% on the sales of these products. On July 28, 2017, Chapter 55 of the Acts of 2017 was enacted; it updated Sections 2 and 3 of Chapter 64N of the General Laws by increasing the state excise tax to 10.75% and the local option sales tax to no more than 3%. In addition to the excise and local option taxes, the Commonwealth’s sales tax of 6.25% applies to marijuana sales.
Effective January 1, 2019, Section 3 of Chapter 153 of the Acts of 2018 imposed a police training surcharge of $2 “upon each vehicular rental transaction contract in the commonwealth.”
|Date published:||September 16, 2019|