A provision contained in the FY 2018 Massachusetts Budget looks to set the stage for possible real-time sales tax remittance requirements in the Commonwealth. While nothing is official yet, the Massachusetts legislature believes that it has recognized an opportunity to utilize “third party payment processors” as a means of ensuring proper tax collection and accelerating tax remittance. The term “third party payment processor” essentially means companies that facilitate payments between vendors and their customers – often through debit and credit cards. Under this budgetary provision, the DOR is tasked with drafting a regulation which would require:
- Vendors to identify any amounts attributable to “sales tax” in a payment request to a processor
- The payment processor to remit the identified tax amount directly to the DOR at the same time as they remit payment to the vendor; and to remit a monthly tax return specifying the vendor name and amount of any payments made.
- The payment processor to report back to the vendor any tax payments made on their behalf.
Under this regime, any tax paid by the payment processor would constitute a credit towards the total monthly sales tax liability of the vendor.
Now – the Legislature recognizes that the DOR should properly consider the technical feasibility of such a new requirement as well as the financial impact on consumers and businesses before imposing any new requirements. Further, while the Legislature apparently prefers to have a new requirement in place by July 1, 2018, the law clearly permits the DOR to say that no such requirement is feasible in the immediate future. However, the Commissioner of Revenue is required to make such a determination on or before November 1, 2017.
What will come of this request is far from clear. However, its strongly indicative of a global trend requiring businesses to provide real-time tax data to revenue authorities. We see it in Latin America. We are starting to see it in Europe, and its starting to make an appearance here in the US.
About the Author
Charles Maniace is the Director of Regulatory Analysis at Sovos. An attorney by trade, Chuck leads a team of attorneys and tax professionals responsible for all the tax and regulatory content that keeps Sovos clients continually complaint. Over his 15 year career in tax and regulatory automation, he has given talks and presentations on a variety of topics including The Taxation of High Tech Transactions, The Taxation of Remote Commerce, The Regulatory Implications of Brexit, The Rise of E-Audits, Form 1042-S Best Practices and Penalty Abatement Practices for Information Returns. Chuck is a member of the Massachusetts Bar and holds a BS in Business Economics from Bentley College, a JD from Boston University School of Law, and an LL.M in Taxation from Boston University School of Law.More Content by Charles Maniace