AAF NewsFlash

Dear Friends of AAF,

AAF is committed to making you aware of your responsibilities and potential risks. The Massachusetts use tax law is often overlooked and we suggest you file returns whether you collect sales tax or not. Exposure to use tax law, though complex, can be simplified by making good faith efforts to comply. Please take a moment to review the below guidelines important to your organization.

A purchaser that buys, rents, or leases tangible personal property outside Massachusetts at a sales tax rate of less than 5% which will be used, consumed or stored in Massachusetts will generally be required to pay the Massachusetts use tax directly to the Commonwealth. A purchaser is responsible for the difference between the Massachusetts sales tax rate of 5% and the rate the tangible personal property was purchased at if less than 5%. For example, if you purchased office furniture at a sales tax rate of 2% from a state that has a use tax agreement with Massachusetts, you will owe the Commonwealth 3% of the purchase price in use taxes if the goods are brought back for use in Massachusetts.

Use taxes are required to be paid for tangible personal property including electronically transferred software and items purchased on the internet or via mail order. However, it is important to note that not all items or businesses are subject to use taxes. Massachusetts tax-exempt items generally include:

·        Sales to nonprofit and charitable tax-exempt organizations or agents defined under Section 501(c)(3)       of the Internal Revenue Code that are in possession of a Sales Tax Exempt Purchaser Certificate or       Contractor’s Sales Tax Exempt Purchase Certificate and a Department of Revenue Certificate of       Exemption;
·         Food for human consumption other than restaurant meals;
·         Individual clothing purchases under $175;
·         Periodicals other than newsletters such as newspapers and magazines;
·         Admission tickets;
·        Utilities and heating fuel to residential users, small businesses with five or fewer employees and gross       income of less than $1 million that present a Small Business Energy Exemption Certificate, and industrial       facilities that use at least 75% of their energy in manufacturing or heating the manufacturing facility;
·        Local residential telephone services billed on a recurring basis or for message unit charges up to       $30/month;
·         Transportation sales that occur after the sale of property;
·         Professional services including accounting, insurance, legal, medical, auto repairs and hair salons;
·         Infrequent and nonrecurring transactions by individuals or companies that are not regularly in this type of       business with the exception of casual sales of cars, boats or trailers that are not family transactions;
·       Items that are bought by an out-of-state purchaser that are not used, stored or consumed in       Massachusetts within six months of the purchase date;
·        Direct sales to exclusive federal and Massachusetts state or municipal wholly owned governmental       agencies or to certain contractors and subcontractors acting as agents for governmental activities; and
·        Materials, tools, fuel, machinery and replacement parts that will be directly and exclusively used to       manufacture, process, or convert tangible personal property which will later be sold or that will be used       for research and development by a manufacturing corporation or research & development corporation.

Prior to paying use taxes, purchasers are almost always required to register with the Department of Revenue. Purchasers must maintain complete and accurate records for taxable or non-taxable sales for a minimum of three years from the date the return was filed or the date it was required to be filed, whichever is later. Use taxes must be itemized on gross receipts relating to the sale.

Filing and payment requirements differ depending on the annual amount of sales/use tax expected to be collected.   For $100 or less, a return must be filed and paid annually. Quarterly payments and filings are required when sales/use tax is expected to be between $101 and $1,200. For $1,201 or more, the annual sales/use taxes are due on a monthly basis. In all cases, payments are due 20 days after the end of the filing period. Even if the sales/use tax is $0, a return must still be timely filed. Late payments and filings are subject to interest and penalty charges.

Please keep in mind, due to the intricacies of the law, guidelines listed may not apply to every transaction. If you have any questions, we welcome you to call any of our partners at 508-366-9100.
Sincerely,
Your Friends at Alexander, Aronson, Finning & Co.