Massachusetts to Automate Penalties on Late Advance Payments Starting July 2025

Beginning July 1, 2025, the Massachusetts Department of Revenue (DOR) will automatically assess penalties on businesses that fail to make required advance tax payments by the 25th of each month.

The advance payment requirement, in place since 2021, applies to businesses with more than $150,000 in annual tax liability from certain indirect taxes, such as sales and use tax including sales tax on services and meals, room occupancy excise, and marijuana retail tax. While the rule applies across industries, cannabis retailers are frequently subject to enforcement due to consistently exceeding the threshold.

The required advance payment is the lesser of:

• Your actual tax liability from the 1st through the 21st of the month, or
• At least 80 percent of the prior month’s total liability

To date, the associated five percent underpayment penalty has been self-assessed by taxpayers. Starting in July 2025, DOR will apply the penalty automatically if it is missing or calculated incorrectly.

Businesses that believe an assessment was made in error or that they are exempt from the requirement will be able to respond through MassTaxConnect. Even so, the responsibility to meet the payment schedule and ensure accurate reporting remains with the taxpayer.

Review Remittance Schedules Now to Avoid Penalties Later

Businesses that exceed the $150,000 threshold should review monthly remittance procedures well before the July 1, 2025 enforcement date. Once automation begins, missing the deadline or submitting an incorrect amount could result in a penalty, even if the full tax is paid later. It is important to understand that the taxes withheld from customers, such as sales and marijuana retail taxes, are held in trust by the business on behalf of the state. This creates a fiduciary responsibility—meaning business owners and managers are legally required to keep these funds separate and remit them on time. Using these funds for other purposes, like operating expenses or loans, exposes owners to personal liability. The state can pursue owners personally to recover unpaid taxes, penalties, and interest.

AAFCPAs supports clients with tax compliance requirements nationwide including those related to cannabis. We understand the complexities of marijuana retail and other indirect taxes in various jurisdictions and have the capacity and expertise to manage compliance for any state. If you are unsure whether your business meets the threshold or if you believe you may have missed required advance payments, AAFCPAs is available to review historical filings, determine applicability, and assist in bringing your accounts current. Early action reduces the risk of penalties and supports ongoing compliance. Consult with your AAFCPAs tax professional for guidance tailored to your situation.

How We Help

AAFCPAs advises businesses on the complexities of state and local tax compliance including sales and use tax, marijuana retail tax, and other indirect taxes subject to enforcement. Our team delivers tailored solutions grounded in deep technical knowledge and a practical understanding of multistate requirements. We help clients assess tax exposure, manage nexus and apportionment, and efficiently meet filing obligations with tax compliance software so they remain focused on growth while reducing the risk of penalties.

These insights were contributed by Kelly Zack, MST, Partner, State & Local Tax (SALT), David Gravel, CPA, MPAc, Tax Director, and Brian O’Hearn, CPA, MSA, Tax Manager. Questions? Reach out to our authors directly or your AAFCPAs partner. AAFCPAs offers a wealth of resources for cannabis operators as well as proactive guidance on State and Local Tax (SALT). Subscribe to get alerts and insights in your inbox.