The Massachusetts Department of Revenue (“the Department”) has recently announced the details of a two-month limited amnesty program which commenced on April 1st and will expire on June 1, 2010. (See Massachusetts Technical Information Release (“TIR”) 10-5, Limited Amnesty For Taxpayers With Existing Business Tax Liabilities.) This limited amnesty program applies to liabilities of “Eligible Tax Types” for taxable periods ending on or before December 31, 2009. Similar to the general amnesty programs of other states, the Massachusetts limited amnesty program grants a waiver of all applicable penalties to “Eligible Taxpayers” who pay the full amnesty liability by the close of the amnesty period. However, unlike other general amnesty programs, participation in Massachusetts’ limited amnesty program is available only to specific “Eligible Taxpayers” who are offered the opportunity to participate.
Specifics for “Eligible Taxpayers” with Outstanding Sales Tax Liabilities
In general, the amnesty provisions define an “Eligible Taxpayer” as a taxpayer who has been issued a “Tax Amnesty Notice”, and (1) has an unpaid and previously self-assessed tax liability for an “Eligible Tax Type”, (2) has previously been assessed a tax liability for an “Eligible Tax Type” and is properly disputing the unpaid liability, or (3) is delinquent in paying the liability.
There are several categories of business and trustee type taxes that qualify as an “Eligible Tax Type”. However, the most significant categories covered under the limited amnesty are sales & use tax, sales tax on telecommunications, and materialman sales tax. Incidentally, in a Press Release issued by the Department to further explain the amnesty, the Department revealed that nearly 36,000 taxpayers, whose combined tax liabilities are estimated at $408.8 million, are expected to receive a Tax Amnesty Notice. Of the $408.8 million, the most significant dollars owed are in the three categories of sales tax ($165.4 million, or approximately 41% of the total).
Thus, if you are one of the 36,000 targeted taxpayers with outstanding sales tax liabilities, you may soon (or may have already) found yourself in receipt of an Amnesty Tax Notice; the Department’s offer to participate. However, once you know that you are one of the “chosen ones”, it is important to comply with the requirements of the amnesty in order to avail yourself of the benefits. Within the Amnesty Tax Offer, you should expect to find an Amnesty Tax Coupon which will show the total dollar amount of the Amnesty Balance Due; in essence, the amount the Department expects to collect in full. In accordance with the amnesty, the Amnesty Balance Due amount should include only the tax and interest with respect to previously filed returns or assessments, and thus, should exclude all potentially applicable penalties, as well as that portion of interest that was previously assessed on any penalty. The full amount of the Amnesty Balance Due must be remitted by the close of the amnesty period, even if a taxpayer does not agree with the balance shown on the Amnesty Tax Coupon. If the full Amnesty Balance is not paid in full, an additional amnesty penalty of up to $500 may be imposed, which will be added to and become part of any outstanding balance which remains unpaid after the close of the amnesty period. Note that payment of the full Amnesty Balance Due will not constitute a forfeiture of statutory rights of appeal or an admission of liability for the disputed assessment.
The Department has released several documents which explain the Limited Amnesty Program in greater detail, as well as Answers to Frequently Asked Questions (FAQs). These include TIR 10-5, issued March 12, 2010, the Department’s Press Release dated March 26, 2010, and the Department’s Amnesty Frequently Asked Questions (FAQ’s). The Department’s website also discusses various methods for remitting payment, including electronically through the Department’s Web Services for Business application.
As the Department has noted that the largest percentage of outstanding tax liabilities it anticipates to collect is in the area of sales tax, taxpayers with outstanding sales tax liabilities will likely receive a Tax Amnesty Offer. Therefore, taxpayers who are disputing or not in agreement with an assessment, such as those that may be subject to Massachusetts’ expansive rules on the taxability of telecommunications services, will need to carefully consider this offer. Still, it appears that overall for eligible taxpayers who receive the amnesty offer, the amnesty provides an opportunity to become current on their sales tax liabilities and receive the benefit of complete penalty waiver while retaining their statutory rights of appeal.
Sylvia F. Dion, MPA, CPA is an independent consultant specializing in providing SALT consultative services to multi-state organizations in all areas of state and local tax. Previously, she has served as a SALT executive with a Big 4 and a national accounting firm and is an authority on Massachusetts SALT issues. She is the creator, author and publisher of The State and Local Tax “Buzz” blog, which can be seen at http://www.thestateandlocaltaxbuzz.blogspot.com. She can reached at email@example.com