| Date: | 04/12/2024 |
|---|---|
| Organization: | Massachusetts Department of Revenue |
| Regulatory Authority: | Massachusetts General Laws |
| Official Version: | Published by the Massachusetts Register |
830 CMR: DEPARTMENT OF REVENUE
830 CMR 62C.00: STATE TAX ADMINISTRATION
830 CMR 62C.16B.1: Advance Payments of Sales and Use Tax and Room Occupancy Excise
(a) Statement of Purpose. The purpose of 830 CMR 62C.16B.1 is to explain the procedures prescribed by the Commissioner, pursuant to M.G.L. c. 62C, § 16B, for the advance payment of sales and use tax liabilities imposed by M.G.L. c. 64H and M.G.L. c. 64I, including marijuana retail taxes, the room occupancy excise imposed by M.G.L. c. 64G, and the local sales tax on meals imposed by M.G.L. c. 64L filed under M.G.L. c. 62C, § 16(g) and (h).
(b) Background. M.G.L. c. 62C, § 16B requires an advance payment of tax for returns due under M.G.L. c. 62C, §§ 16(g) and (h) for taxable periods ending after April 1, 2021. The advance payment requirement applies to certain taxpayers required to collect sales and use tax or room occupancy tax as further detailed in 830 CMR 62C.16B.1(4). Prior to the enactment of M.G.L. c. 62C, § 16B, payment of these taxes was due when the taxpayer filed its return. Certain taxpayers are excluded from this requirement, as further detailed in 830 CMR 62C.16B.1(5).
830 CMR 62C.16B.1 is effective for taxable periods ending after April 1, 2021.
(c) Outline of Topics. The following sections are contained in 830 CMR 62C.16B.1.
(1) Statement of Purpose, Background, Effective Date, Outline of Topics.
(2) Definitions.
(3) General Rule.
(4) Advance Payment Requirement.
(5) Taxpayers not Subject to Advance Payment Requirement.
(6) Penalties.
(7) Examples.
(8) Recordkeeping.
For the purpose of 830 CMR 62C.16B.1, the following terms shall have the following meanings:
Commissioner. The Commissioner of Revenue or the Commissioner's duly authorized representative.
Intermediary. As defined in 830 CMR 64G.1.1(2).
Marijuana Retail Taxes. As defined in 830 CMR 64N.1.1(2).
Marijuana Retailer. As defined in 830 CMR 64N.1.1(2).
Marketplace Facilitator. As defined in 830 CMR 64H.1.9(2).
Tax. Any tax, excise, interest, penalty, or addition to tax required to be reported on a return filed under M.G.L. c. 62C, §§ 16(g) and (h), including but not limited to the sales and use tax, the sales tax on meals, the sales tax on services, the marijuana retail tax, the state and local room occupancy excise and associated local fees, and the local sales tax on meals.
Taxable period. The monthly period for which a tax return is due under M.G.L. c. 62C, § 16(g) or § 16(h).
Taxpayer. Any person required to report any tax, excise, interest, penalty, or addition to tax on a return required to be filed by M.G.L. c. 62C, §§ 16(g) or 16(h), including but not limited to a vendor, marketplace facilitator, vendor of meals, vendor of telecommunications services, marijuana retailer, operator or intermediary.
Telecommunications services. As defined in 830 CMR 64H.1.6(2).
Vendor. As defined in 830 CMR 62C.16.2(2).
Vendor of meals. As defined in 830 CMR 62C.16.2(2).
Effective for taxable periods ending after April 1, 2021, M.G.L. c. 62C, § 16B requires taxpayers to remit an advance payment of the tax to be reported on sales and use tax returns or room occupancy returns filed pursuant to M.G.L. c. 62C, § 16(g) and (h). The due date of the advance payment is the 25th day of the month that constitutes the taxable period. The advance payment due is the amount of tax collected from the 1st day of the taxable period through and including the 21st day of the month, as further detailed in 830 CMR 62C.16B.1(4). For advance payments made on or after December 13, 2021, the advance payment due is the lesser of (1) the tax collected on or before the 21st day of the filing period; or (2) 80% or more of the taxpayer’s total tax due for the immediately preceding month, provided that there was such a liability in the prior month.
If a taxpayer subject to the rule fails to pay the amount required to be remitted on or before the due date of the advance payment, it will be subject to a 5% penalty on the amount of such underpayment, unless the underpayment is due to a reasonable cause. Whether there is reasonable cause for an underpayment will be determined based upon the facts. Also, the penalty will not be imposed if the amount remitted on or before the due date of the advance payment is equal to 70% or more of the total tax due for the month. See 830 CMR 62C.16B.1(6).
Any remaining tax due for the taxable period after the advance payment must be remitted on or before the 30th day after the close of the taxable period, at the time the return for that taxable period is required to be filed.
Certain taxpayers are excluded from the advance payment requirement. See 830 CMR 62C.16B.1(5).
(a) Advance Payment Required. For advance payments made before December 13, 2021, the advance payment required is equal to the amount of the tax collected from the 1st through and including the 21st day of the month of the taxable period, as modified by 830 CMR 62C.16B.1(4)(c)-(f), if applicable. For advance payments made on or after December 13, 2021, the advance payment required is the lesser of (1) the tax collected on or before the 21st day of the filing period; or (2) 80% or more of the taxpayer’s total tax or excise due for the immediately preceding month, provided that there was such a liability in the prior month.
(b) Due Date of Advance Payment. Taxpayers subject to the advance payment requirement in M.G.L. c. 62C, § 16B, must make the advance payment on or before the 25th of the month. Where the due date falls on a weekend or holiday, the payment may be made on the next succeeding business day. See M.G.L. c. 30, § 24.
(c) Amount of Tax Collected. The amount of tax collected is determined by the type of tax, as follows:
1. Sales Tax on Meals. For taxpayers required to report sales tax on meals, “tax collected” is equal to the taxpayer’s gross receipts from taxable sales of meals multiplied by the sum of the state and local tax rate, as applicable.
2. Sales Tax on Telecommunication Services. For taxpayers required to report sales tax on telecommunications services, “tax collected” is equal to the taxpayer’s gross sales of taxable services multiplied by the applicable tax rate. Tax collected does not include use tax that the taxpayer owes on its purchases.
3. Marijuana Retail Taxes. For taxpayers required to report marijuana retail taxes, “tax collected” is equal to gross receipts from taxable sales multiplied by the sum of the state sales tax rate, the marijuana excise rate and the local option excise rate, as applicable.
4. Sales and Use Tax. For taxpayers not referenced in (4)(c)1. through 3. that are required to report sales and use tax, “tax collected” is equal to such taxpayer’s gross receipts from taxable sales multiplied by the applicable tax rate. A marketplace facilitator must include gross receipts from taxable sales made by the facilitator itself and made by the facilitator on behalf of third-party marketplace sellers. Tax collected does not include use tax that the taxpayer owes on its purchases.
5. Room Occupancy Excise. For taxpayers required to report the room occupancy excise, “tax collected” is equal to the total gross receipts from taxable rents multiplied by the sum of the state room occupancy excise rate, and the local room option excise rate, as applicable, and it includes any other local fees required to be reported on the return.
(d) Tax Collected for Multiple Types of Tax. Where a taxpayer is subject to the advance payment requirement for more than one type of tax as referenced in 830 CMR 62C.16B.1(5), the taxpayer must separately calculate and make an advance payment of the tax collected under 830 CMR 62C.16B.1(4)(c)1. through 5. for each type of tax, as applicable.
Example. The Tea Cozy is a specialty tea shop that serves meals and beverages. It also has a small retail display with fancy tea pots, tea cozies and other merchandise available for purchase. Assuming that Tea Cozy is subject to the advance payment requirement for the sales tax on meals and sales and use tax, determined separately based on the cumulative liability for each type of tax under 830 CMR 62C.16B.1(5)(a)3, it would separately calculate its gross receipts from taxable sales for each type of tax and make two advance payments.
(e) Credit for Pre-paid Taxes. A tobacco retailer may exclude from tax collected, as determined in 830 CMR 62C.16B.1(4)(c), the amount of any pre-paid sales tax on tobacco products paid from the 1st through and including the 21st day of the month of the taxable period. Any pre-payment excluded from tax collected for purposes of calculating the advance payment must be reported on the return filed for such period pursuant to M.G.L. c. 64H, § 3A.
(f) Consistent Reporting Method. For purposes of the advance payment requirement, a taxpayer who treats sales and use tax as collected at the time customers are billed, and files its monthly return on that basis, should determine the tax collected for purposes of the advance payment requirement in the same manner. In the event that a taxpayer subject to the advance payment requirement changes its method of counting collections for purposes of filing its return, the taxpayer must make a corresponding adjustment and any other adjustment as necessary to its advance payment calculation to prevent the double counting or omission of tax. This requirement of consistent reporting applies equally where a taxpayer is basing its advance payment on 80% of the prior month’s total liability.
(g) Payment of Use Tax on Purchases. Taxpayers who owe use tax on their purchases shall report and pay all of the use tax due on such purchases with their returns as filed on the 30th day after the close of the taxable period.
(a) Taxpayers with $150,000 or Less in Tax Liability. The advance payment requirement does not apply to taxpayers whose cumulative Massachusetts tax liability in the immediately preceding calendar year is equal to or less than $150,000.
1. Calculation of $150,000 Threshold. The taxpayer’s cumulative Massachusetts tax liability is equal to the total amount of tax required to be reported on returns filed under M.G.L. c. 62C, §§ 16(g) or 16(h)from January 1st through and including December 31st, for all taxable periods in the immediately preceding calendar year for each type of tax. For purposes of the $150,000 threshold, tax includes all state and local tax and excise and local fees, as applicable, but does not include use tax owed by vendors on their purchases or pre-paid sales tax paid by tobacco retailers in the immediately preceding calendar year.
2. Taxpayers with Multiple Returns for the Same Type of Tax. A taxpayer that filed multiple returns for the same type of tax in the immediately preceding calendar year must aggregate all the tax liability for that type of tax for purposes of calculating the $150,000 threshold.
Example. Maria’s Coffee owns and operates five coffee shops that are all on the North Shore. Each shop had $50,000 in tax liability for sales tax on meals from January 1, 2020 through December 31, 2020 and each shop continues to operate from April 1, 2021 through December 31, 2021. Maria’s Coffee must make advance payments of sales tax on meals for all five locations from April 2021 through December 2021 because it had $250,000 ($50,000 x 5 locations) in total tax liability for sales tax on meals in 2020.
3. Taxpayers with Returns for Different Types of Tax. A taxpayer that filed returns for different types of tax in the immediately preceding calendar year (e.g., a restaurant owner filing sales tax on meals returns and sales and use tax returns, or an operator filing room occupancy returns and sales and use tax returns) shall calculate the $150,000 threshold separately based on the cumulative liability for each type of tax.
Example 1. Martha’s Hotel operates a hotel on Martha’s Vineyard. The hotel also operates a gift shop that sells artwork, jewelry, clothing, and other merchandise. Martha’s Hotel had $250,000 in tax liability for room occupancy excise in 2020 and had $75,000 in sales tax liability in 2020. Martha’s Hotel must make advance payments of room occupancy excise for the 2021 tax periods beginning after April 2021 because it had more than $150,000 in total tax liability for room occupancy excise in 2020. However, it does not have to make advance payments of sales tax in 2021 because it had less than $150,000 in sales tax liability in 2020.
Example 2. Cynthia’s Garden operates a small vegetarian restaurant in Fall River. Cynthia’s Garden also sells books on vegan cooking, vegan candles and soaps, and other similar products. Cynthia’s Garden had $100,000 in tax liability for sales tax on meals in 2020 and had $55,000 in sales tax liability in 2020. Cynthia’s Garden does not have to make advance payments of sales tax on meals in 2021 because it had less than $150,000 in tax liability for sales tax on meals in 2020. Additionally, Cynthia’s Garden does not have to make advance payments of sales tax in 2021 because it had less than $150,000 in sales tax liability in 2020.
4. Time of Determination. The determination as to whether a taxpayer is excluded from the advance payment requirement under 830 CMR 62C.16B.1(5)(a) is made on an annual basis before the due date of the first advance payment required pursuant to 830 CMR 62C.16B.1(4) and applies for the entire calendar year.
5. Non-filers or False Returns. The taxpayer’s total cumulative tax liability for the immediately preceding calendar year under 830 CMR 62C.16B.1(5)(a) is based on the proper amount of tax due. If a taxpayer has failed to file a return or has filed a false or fraudulent return with intent to evade a tax, and the full amount of the tax liability for the immediately preceding calendar year, as determined under 830 CMR 62C.16B.1(5)(a), has not been reported, the Commissioner may calculate the taxpayer’s tax liability for purposes of the $150,000 threshold according to the Commissioner's best information and belief. A taxpayer cannot avoid the advance payment requirement by failing to file a proper return.
(b) Materialman Exclusion. The advance payment requirement does not apply to a materialman who files a return pursuant to M.G.L. c. 62C, § 16(h). Such taxpayers must continue to remit all tax collected for the taxable period when the tax return for such period is required to be filed pursuant to M.G.L. c. 62C, § 32 and M.G.L. c. 62C, § 16(h).
(c) Quarterly or Annual Sales and Use Tax Filers. A taxpayer that is required to file on a quarterly or annual basis under 830 CMR 62C.16.2(4) shall not be required to make an advance payment of tax pursuant to M.G.L. c. 62C, § 16B even if its cumulative Massachusetts tax liability as determined under 830 CMR 62C.16B.1(5)(a) was more than $150,000.
(d) Room Occupancy Excise. A taxpayer who does not have to file a return under 830 CMR 64G.1.1(11)(c) because it has no tax due during that month, is not required to make an advance payment for that tax period.
(a) Imposition of Penalties. Where a taxpayer fails to pay the full amount required to be remitted on or before the due date of the advance payment under 830 CMR 62C.16B.1(4), the taxpayer will be subject to a 5% penalty on the amount of underpayment.
(b) Amount of Underpayment. The amount of underpayment is the difference between the advance payment, if any, made on or before the due date of the advance payment and the proper amount of the advance payment that was due for the taxable period pursuant to 830 CMR 62C.16B.1(4).
(c) Exception. The penalty will not be imposed if the payment made on or before the due date of the advance payment is equal to 70% or more of the total tax due for the taxable period.
(d) Waiver or Abatement of Penalty for Reasonable Cause. The Commissioner may waive or abate the penalty imposed under M.G.L. c. 62C, § 16B, if the Commissioner finds that a taxpayer's failure to pay the advance payment in full or in part was due to reasonable cause and not willful neglect. A taxpayer seeking a waiver or abatement of the penalty must present specific facts establishing that its failure to timely pay was due to reasonable cause. A mere assertion, by affidavit or otherwise, that the failure to timely pay was reasonable or excusable due to oversight or inadvertence is not sufficient to establish reasonable cause. For tax periods beginning with April 2021 through and including December 2021, the Commissioner will presume that reasonable cause exists for the waiver of an otherwise applicable underpayment penalty where the taxpayer makes an advance payment on or before the due date of the advance payment that is equal to 80% or more of the total tax due for the immediately preceding month, provided that there was liability with respect to the same tax for the prior month.
The examples below show how to calculate the advance payment and apply the penalty provisions. In each example, assume that Super Toys Inc. is subject to the advance payment requirement in the current year because it had more than $150,000 in cumulative sales tax liability in the prior year. Assume further that all of Super Toys Inc.’s gross receipts are from taxable sales.
Example 1. Super Toys Inc. has $256,000 of gross receipts from January 1, 2022 through and including January 21, 2022. Super Toys Inc. collects $16,000 ($256,000 x 6.25%) of sales tax and remits the tax on January 25, 2022. Super Toys Inc. has remitted 100% of the tax it collected on its gross receipts between January 1 and January 21. Because it has paid the advance payment amount required to be remitted on or before the 25th of the month, there is no underpayment. Super Toys Inc. must file its return for January 2022 within 30 days of the end of January. The return is therefore due on or before March 2, 2022.
Super Toys Inc. has an additional $69,000 of gross receipts during the remainder of January, resulting in $325,000 in total gross receipts for January 2022. Based on its total gross receipts in January, Super Toys Inc.’s sales tax liability for January 2022 is $20,313 ($325,000 x 6.25%). Super Toys Inc. must remit the remaining tax due on or before March 2, 2022. The remaining tax due is $4,313, which is the difference between the amount remitted on January 25 and the total tax liability for January.
Example 2. Super Toys Inc. has $256,000 of gross receipts from January 1, 2022 through and including January 21, 2002. Super Toys collects $16,000 in tax but remits only $15,000 on January 25, 2022. Super Toys Inc. had $300,000 of gross receipts in December 2021, resulting in a sales tax liability of $18,750 for the month of December. Super Toys Inc.’s $15,000 payment is equal to 80% of its sales tax liability for the prior month ($18,750 x 80%). Super Toys Inc. has therefore paid the required advance payment amount on or before January 25. There is no advance payment underpayment for January.
Super Toys Inc. has a total of $325,000 of gross receipts during January 2022 ($256,000 from January 1 through and including January 21 plus $69,000 for the remainder of the month). Super Toys Inc.’s sales tax liability for January 2022 is $20,313 ($325,000 x 6.25%). The remaining tax due is $5,313, which is the difference between what was remitted on January 25 and the total tax liability for January. Super Toys Inc. must file its return for January 2022 within 30 days of the end of January. The return is therefore due on or before March 2, 2022.
Example 3. Assume the same facts as in Example 2, except that Super Toys Inc. remits only $14,500 on January 25, 2022. Super Toys Inc. was required to remit the lesser of the following two amounts by that date:
The tax collected on gross receipts from January 1, through and including January 21, which is $16,000 ($256,000 x 6.25%); or
Eighty percent of the total tax liability for December, which is $15,000 ($18,750 x 80%).
Based on these facts, Super Toys Inc. underpaid the sales tax by $500 ($15,000 owed less $14,500 paid) when it remitted its payment on January 25. The amount of the underpayment must be paid with Super Toys Inc.’s sales tax payment for the month of January.
Super Toys Inc.’s underpayment will not result in a penalty. Super Toys Inc. qualifies for a penalty exception because it paid 70% or more of its January sales tax liability by the January 25 advance payment deadline. Specifically, Super Toys Inc.’s $14,500 payment covered 71.3% ($14,500 / $20,313) of the tax liability for January.
Example 4. Assume the same facts as in Example 2, except that Super Toys Inc. remits only $10,000 on January 25, 2022. Super Toys Inc. was required to remit the lesser of the following two amounts by that date:
The tax collected on gross receipts from January 1, through and including January 21, which is $16,000 ($256,000 x 6.25%); or
Eighty percent of the total tax liability for December, which is $15,000 ($18,750 x 80%).
Based on these facts, Super Toys Inc. underpaid the sales tax by $5,000 ($15,000 owed less $10,000 paid). Super Toys Inc.’s underpayment will result in a 5% penalty on the amount of the underpayment.
Super Toys Inc. does not qualify for a penalty exception because it did not pay 70% or more of its January sales tax liability by the January 25 advance payment deadline. Specifically, Super Toys Inc.’s $10,000 payment covered 66.7% ($10,000 / $15,000) of the tax liability for January. Super Toys Inc. is subject to a penalty of $250 ($5,000 x 5%), which is due on March 2.
Taxpayers must keep records sufficient to determine whether the proper amount of tax has been paid pursuant to 830 CMR 62C.16B.1(4), including records substantiating any pre-paid taxes, and records sufficient to determine whether they are properly excluded from the advance payment requirement under 830 CMR 62C.16B.1(5). These records must be kept for the amount of time specified in 830 CMR 62C.25.1, Record Retention, and must be produced for review by the Commissioner in the course of an audit of the taxpayer.
Regulatory Authority
830 CMR 62C.16B.1: M.G.L. c. 14, § 6(l); M.G.L. c. 62C, § 3
Date of Promulgation: April 12, 2024
