Massachusetts governor proposes daily sales tax remittance once again
- Feb 1, 2018 | Gail Cole
In his FY 2018 Budget Proposal, Massachusetts Governor Charlie Baker proposed requiring third-party payment processors (e.g., credit card companies) to remit collected sales tax on a daily basis. Controversial from the outset, the direct payment of sales tax wasn’t adopted last year: The Legislature found it would not be cost effective to implement by June 1, 2018. Now it’s back on the table in the governor’s FY 2019 Budget Proposal.
Part of Gov. Baker’s latest plan to modernize sales tax, the proposed timing change would require third-party payment processors (predominantly credit card companies) to remit the tax attributed to each sale to the Commonwealth on a daily basis, so long as the transaction involves a vendor or operator that employs 50 or more people. No such direct-pay requirements would extend to cash sales.
The first time Gov. Baker introduced this idea, he was shooting to implement it by the middle of 2018 and expected the state to get a one-time boost of $125 million in sales tax revenue from the change. This time around, he proposes giving the Massachusetts Department of Revenue ample time to explore the idea and develop regulations — until May 31, 2021, according to the Massachusetts Taxpayers Foundation.
Simple but complicated
It’s a relatively simple concept. However, the National Council of State Legislatures SALT Task Force called the 2017 proposition “Complicated. Really complicated.” Furthermore, the Council on State Taxation (COST) points out in a draft policy statement on daily sales tax remittance that daily remittance would impose “unacceptably high implementation and compliance costs on retailers, payment processors, and banks for a minimal benefit to the state.”
A more in-depth study on proposed daily remittance in Massachusetts found that implementation would cost businesses up to “$1.2 billion in one-time, non-recurring costs and an additional $28 million in annual recurring costs.” States, too, would likely experience significant implementation costs.
While no states currently require daily remittance, Connecticut, Nebraska, New York, and Puerto Rico have also considered it. If Massachusetts succeeds in implementing accelerated sales tax remittance, it would likely dramatically impact the way many companies do business in the state.