Massachusetts Enacts Provision for Accelerated Sales Tax Remittance

On December 11, 2020, Massachusetts Gov. Charlie Baker signed the Fiscal Year 2021 budget into law, which contains a provision for accelerated sales tax remittance. Effective April 1, 2021, businesses that have collected and remitted more than $150,000 in sales tax or room occupancy and meals tax in the preceding calendar year will be required to remit tax collections through the twenty-first day of the month no later than the twenty-fifth day of the same month. The accelerated remittance timeline will not apply to businesses with less than $150,000 in sales tax or room occupancy and meals tax in the preceding calendar year. A 5% penalty of the amount of an underpayment will be imposed unless the underpayment is due to a reasonable cause. A penalty will not be imposed if the payment made on or before the twenty-fifth day of the same month is not less than 70% of the total tax collected during the filing period. Businesses that have collected and remitted more than $150,000 in Massachusetts sales tax or room occupancy and meals tax in the preceding calendar year in 2020 will want to put a system in place prior to April 2021 to ensure they are able to timely file and remit the accelerated sales tax payments. (H.B. 5164; Press Release, Office of Governor Charlie Baker and Lt. Governor Karyn Polito, December 11, 2020)

UPDATE: In the final published version of this Technical Information Release (TIR) 21-4, the Massachusetts Department of Revenue added a temporary “safe harbor.” This indicates that as long as the taxpayer remitted a payment on the 25th of the month equal to 80% of the tax collected in the prior month, the 5% penalty for underpayment would be waived. This safe harbor was set to end at the start of 2022, but the DOR decided that large taxpayers who met the threshold requirement had two choices for Advanced Payments:

  1. “Remit the actual tax collected between the 1st and the 21st of the month on the 25th, OR
  2. Remit not less than 80% of the tax collected during the immediately preceding filing period.”

(Massachusetts Department of Revenue, TIR 21-4: Tax Provisions in the Fiscal Year 2021 Budget, effective January 1, 2022)

Posted on December 27, 2021