Massachusetts Enacts FY2010 Budget Bill Including Sales Tax Rate Increase
| Massachusetts Enacts FY2010 Budget Bill Including Sales Tax Rate Increase |
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On June 29, 2009, Governor Deval Patrick signed into law the budget bill for FY2010 that includes an increase in the sales and use tax rates to 6.25% effective August 1, 2009 and eliminates the tax exemption on sales of alcoholic beverages. The bill amends provisions of the Massachusetts personal and corporate income tax law, decoupling from certain provisions of the federal stimulus act. It also authorizes the imposition of tax on gross revenues derived from direct broadcast satellite services and authorizes cities and towns to levy a local option meals excise. Sales tax provisions. Effective August 1, 2009, the sale and use tax rate is increased to 6.25% from 5%. In the case of sales of gas, steam, electricity or telecommunications services billed on a recurring basis, the new rate applies as of the first billing period starting on or after August 1, 2009. The tax computation must be carried to the third decimal place and must be rounded to a whole cent, rounding up to the next cent whenever the third decimal place is greater than four. A seller may elect to compute the tax due on a transaction on an item or an invoice basis. Effective August 1, 2009, the local excise tax rate that cities or towns, except Boston, may impose on the transfer of occupancy of any room in a bed and breakfast, hotel, lodging house or motel located in the city is increased to up to 6% of the total amount of rent for such occupancy. The rate for Boston is raised to 6.5%. Effective August 1, 2009, the exemption from the lodgings tax for religious, charitable, educational and philanthropic institutions is clarified to include dormitories and that the exemption will not apply to accommodations provided by any such institution at a hotel or motel operated by the institution. Effective August 1, 2009, the bond or deposit required to be made with the Commissioner by a nonresident contractor with contract in Massachusetts is raised to 6.25%, from 5%, of the total amount to be paid under the contract. Effective August 1, 2009, the tax exemption for sales of alcoholic beverages is eliminated. The Commissioner may adopt reasonable transition rules, by regulation or otherwise, including but not limited to the application of the sales and use tax rate increase authorized by this Act to: (1) building materials and supplies to be used in construction, reconstruction, alteration, remodeling or repair of any building or structure pursuant to a contract entered into before the effective date of the rate increase or entered into within 60 days after said effective date pursuant to a bid required to be submitted before said date; (2) unconditional written contracts for the sale of tangible personal property subject to sales or use tax entered into before the effective date of the sales and use tax rate increase where such property is delivered not later than 90 days from said effective date; or (3) periodic bills for taxable services including periods before and after the effective date of the rate increase. For purposes of subsection (1), the sale or use must take place before January 1, 2011. For purposes of subsections (1) and (2), sale or use excludes the rental or lease of tangible personal property. Tax credits. For personal and corporate income tax purposes, the aggregate salary and compensation amounts including all per diems, housing and other allowances, paid to or for the services of an individual does not qualify for the film tax credit to the extent that such amounts exceed $2 million. This provision is effective for motion picture production companies filing film credit applications received by the Commissioner on or after January 1, 2009, provided that it does not apply to motion picture production companies filing sales tax exemption applications that are received by the Commission before June 1, 2009. For personal and corporate income tax purposes, effective July 1, 2009, any excess credit is 100% refundable. Prior to July 1, 2009, the amount that may be refunded was 90% of the excess credit. Property tax provisions. The maximum amount of the property tax liability reduction in exchange for volunteer services by persons over age 60 is increased to $1,000 from $750. Additional provision clarifies that poles, underground conduits, wires and pipes of telecommunications companies laid in or erected on public and private ways and property are assessed to their owners in the cities or towns where they are laid or erected. For this purpose, telecommunications companies include cable television, Internet service, telephone service, data service and any other telecommunications service providers. This provision takes effect as of January 1, 2009 and applies to property taxes assessed for fiscal years beginning on or after July 1, 2009. Federal stimulus decoupling provisions. Massachusetts decouples from the deduction in Internal Revenue Code section 163(e)(5) to the extent it is increased by amendments by § 1232 of the American Recovery and Reinvestment Act of 2009 to Internal Revenue Code Sec. 163(a)(5)(F) suspending the rules for high-yield OID obligations and to Internal Revenue Code section 163(i)(1) regarding the application of higher rate. This provision is applicable to obligations issued after August 31, 2008 in taxable year ending after that date. Effective July 1, 2009, Massachusetts decouples from Internal Revenue Code section 382 limitation rule providing that notwithstanding federal income tax treatment to the contrary, for purposes of Massachusetts corporate and personal income tax laws, Internal Revenue Code section 382(n) inserted by the American Recovery and Reinvestment Act of 2009 has no force or effect in any taxable year. It is also provided that effective July 1, 2009, notwithstanding federal income tax treatment to the contrary, for purposes of Massachusetts corporate and personal income tax laws, the rules of Internal Revenue Code section 382 must be applied without regard to the treatment of a change in ownership of a bank or other corporation provided in IRS Notice 2008-83 or in any federal statutory or administrative codification, supplement or implementation of such Notice. For purposes of M.G.L, chapters 62 and 63, IRS Notice 2008-82 and any codification, supplement or implementation must have no force or effect in any taxable year. For corporate income tax purposes, Massachusetts decouples from the Internal Revenue Code section 108(i) as amended by the 2009 Recovery Act providing that income from reacquisitions of business debts at a discount in 2009 and 2010 is deferred for up to five years, then included ratably over five years. This provision is effective for discharges in taxable years ending after December 31, 2008. Effective for tax years ending on or after January 1, 2009, Massachusetts conforms to the current IRC with regards to the federal provision providing for exclusion of cobra subsidy from income under Internal Revenue Code section 139(C). Local option meals excise. Effective October 1, 2009, cities and town are authorized to impose a local sales tax on the sale of restaurant meals originating within the city or town at a rate of .75% of the gross receipts of the vendor from the sale of restaurant meals. Sale of a meal by a restaurant is sourced to the business location of the vendor if the meal is received by the purchaser at the business location of the vendor or if the meal is delivered by the vendor to a customer, regardless of the location of the customer. Vendors must add the tax to the sales price and collect from the purchaser the full amount of the tax. Every officer or employee of a corporation or a member or employee of a partnership or limited liability company, who as an officer, employee or member has the duty to pay over the tax, and fails pay the tax to Commissioner will be personally and individually liable therefor to Massachusetts. The disclosure of information necessary for administration of the local option tax is allowed. Direct broadcast satellite service. Effective August 1, 2009, and applicable to gross revenues derived by a direct broadcast satellite service provider that are billed to subscribers or customers on or after that date, Massachusetts imposes an excise on the provision of direct broadcast satellite service to a subscriber or customer by any direct broadcast satellite service provider in an amount equal to 5% of the direct broadcast satellite provider's gross revenues from or attributable to such customer or subscriber. Direct broadcast satellite service is the distribution or broadcasting by satellite or video programming or services directly to receiving equipment located at an end user subscriber's or an end user customer's premises, including, but not limited to, the provision of premium channels, the provision of music or other audio services or channels and any other service received in connection with the provision of direct broadcast satellite service. A direct satellite service provider must have been issued a registration in order to do business in Massachusetts. Direct broadcast satellite service providers must file a return with the Commissioner on or before the 20th day of each calendar month stating the gross revenues derived during such month from the provision of direct broadcast satellite service. A satellite service provider is required to keep and preserve suitable records for taxable charges and such other books, papers, records, and data to determine the amount of tax due and establish that it has repaid to the purchaser the amount of refund for which an application for refund is made. |
