Massachusetts to Implement Advance Sales Tax Payment Program for April

Charles Maniace
March 15, 2021

This blog was last updated on February 23, 2024

As previously reported by my colleague, Erik Wallin, the Massachusetts Department of Revenue is set to start enforcing a new advance payment program applicable to sales, use and room occupancy tax.

The requirements are detailed in a draft Technical Information Release and in an email sent to taxpayers on March 5. There are two critical changes to sales tax compliance obligations that all Massachusetts taxpayers must consider:

  • Effective for tax periods beginning on April 1, 2021, monthly sales/use tax returns become due on the 30th of the following month. This change applies to all taxpayers.
  • Any taxpayer whose cumulative Massachusetts sales and use tax liability in the immediately preceding calendar year (January to December 2020) exceeded $150,000 will need to make an “advance” sales tax payment due on the 25th of the month based on actual tax collected starting the 1st of the month and ending on the 21st.

Unlike most other states with more traditional pre-payment requirements, the clear intent behind the Massachusetts requirement is that taxpayers determine their actual tax liability from the first three weeks and remit the advance payment amount, without filing a tax return, on the 25th. Failing to make a sufficient advance payment will result in a 5% penalty based on the amount underpaid. Massachusetts will waive any penalty if the amount remitted on the 25th is equal to 70% or more of the total tax due for that month. Any tax collected after the 21st of the month is remitted along with the standard monthly tax return, now due at the end of the following month.

For taxpayers subject to this new requirement, this is how filing and remittance will look for April and May.

  • April 20 – March 2021 Tax Return due. Remittance due for tax collected between March 1-31
  • April 25 – Advanced Payment due for Tax Collected from April 1-21
  • May 25 – Advanced Payment due for Tax Collected from May 1-21
  • May 30 – April 2021 Tax Return due. Remittance due for tax collected between April 22-30

While the Commonwealth is still finalizing the Technical Information Release and will likely issue regulations, the immediacy of the first deadline requires action. First, all taxpayers should evaluate whether they are subject to the new advance payment requirement based on their 2020 tax remittances. Taxpayers required to make advance payments should further consider what they need to do to determine taxable sales effectuated between the 1st and the 21st of the month and how they might be ready to make a tax payment on the 25th.

The Massachusetts system does not overtly contemplate estimating tax liability. Nonetheless, it seems possible, if not likely, that some sellers may need to embed certain estimates and assumptions into their process. In so doing, it is important to understand that even the most reasonable estimation process will likely not be considered “good cause” to avoid an underpayment penalty.

Now, it’s unclear whether the Massachusetts advance payment program sits on the leading edge of a new trend in “real time” tax compliance or whether it might end up being a challenging outlier. Regardless, it’s clear that sales tax compliance is becoming more and more complex by the day and companies need to be ready for whatever might lie ahead.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Charles Maniace

Chuck is Vice President –Regulatory Analysis & Design at Sovos, a global provider of software that safeguards businesses from the burden and risk of modern tax. An attorney by trade, he leads a team of attorneys and tax professionals that provide the tax and regulatory content that keeps Sovos customers continually compliant. Over his 20-year career in tax and regulatory automation, he has provided analysis to the Wall Street Journal, NBC, Bloomberg and more. Chuck has also been named to the Accounting Today list of Top 100 Most Influential People four times.
Share this post

North America Sales & Use Tax
February 6, 2025
The Tariff and Sales Tax Mishmash – Untying the Mess

This blog was last updated on February 6, 2025 Talk of tariffs dominates the current news cycle with some commentators suggesting that tariffs will spell disaster for our economy while others say the exact opposite. We’ve seen the stock market sometimes fluctuate as tariffs are announced but later suspended, leaving us to wonder whether an […]

retailer dtc wine shipping
North America ShipCompliant
February 6, 2025
Retailer DtC Wine Shipping: The Time Has Come

This blog was last updated on February 6, 2025 By Tom Wark, Executive Director, National Association of Wine Retailers We are often reminded by the media and those in the wine industry—as well as by wine enthusiasts—that the three-tier system of alcohol distribution in most states hinders consumer access to the expansive number of wines […]

Montana 1099-DA
North America Tax Information Reporting
February 5, 2025
State Filing Alert: Montana’s New 1099-DA Requirements for Crypto Brokers

This blog was last updated on February 5, 2025 Reporting digital asset transactions on Form 1099-DA just got a little more complicated. For 2025 transactions, crypto brokers that file Form 1099-DA with the IRS will be required to file the 1099-DA with the State of Montana. This makes Montana the first state to introduce a […]

North America ShipCompliant
January 23, 2025
DtC Wine Shipping in 2024: A Year-in-Review

This blog was last updated on January 28, 2025 The direct-to-consumer (DtC) wine shipping channel faced a storm of challenges in 2024, navigating some of the toughest market conditions in over a decade. As inflation tightened wallets and consumer behaviors shifted, the industry recorded its steepest declines in shipment volume and value since the inception […]

Form 1099-DA Crypto Transactions
North America Tax Information Reporting
January 21, 2025
What is Form 1099-DA and How Does it Impact Crypto Transactions?

This blog was last updated on January 24, 2025 The IRS has released Form 1099-DA and its accompanying instructions for filing for TY 2025. Form 1099-DA is the newest IRS information return, designed for reporting digital asset proceeds from broker transactions and is required to be filed by brokers managing digital assets such as NFTs […]