Commonwealth Conversations: Revenue

Commissioner Pitter Addresses the IRS CPA Association at annual dinner

 

 

 

The IRS-CPA Association's 35th Annual Dinner

Revenue Commissioner Amy Pitter joined federal and state auditors at their annual dinner to update them on current DOR initiatives such as DOR360, the early mediation program and the Advisory Council.

Pictured from left: Frederick Beebe, MA School Building Authority; Phil Weinberger, DOR; George Barresi, DOR; Amy Pitter, DOR Commissioner

Surprise! Your online seller doesn't collect sales tax, but that doesn't mean you don't owe it

Whether it's a retailer on the Web or a brick and mortar business across the state line, if the product or service you buy from them is considered a taxable good in the Commonwealth, chances are you could be breaking the law by not paying state taxes on these purchases.

Massachusetts, like 44 other states, has a tax on the sales price or rental charge of tangible property. The tax is due whether you purchase the property at a traditional retail store, over the phone or Internet or by mail order.

The big difference is that in-state retailers and vendors generally collect the 6.25% tax from you at the time of purchase and then submit it to the Commonwealth.

But if the remote seller you buy from doesn't collect the full MA sales tax on any covered item, and you use the product in Massachusetts, the law says you are responsbile for paying the tax directly to the state.

Last tax year, more than 58,000 Massachusetts taxpayers reported $5.5 million in use taxes. That's a slight increase over the previous tax year, but it's still a very low compliance rate when compared with the $192 million in Internet sales taxes that the Department of Revenue estimates the state will forgo this fiscal year alone.

How do you get taxpayers to pay what they owe? Tax collection in the United States is based on the honor system. The IRS and DOR expect taxpayers to do the right thing and for the most part they do. The nation's voluntary compliance rate--the amount of tax liability that is paid on time--has remained steady at 83% the last time the IRS measured the tax gap in 2006. When you figure in enforcement and late payments, more than 85% of taxpayers comply with federal tax laws.

As you might expect, compliance in paying a tax is highest when the IRS or DOR has more third-party information to compare to what taxpayers are reporting.

With data mining, new statistical methodology and modeling growing increasingly popular in tax collection, it is not unreasonable to expect that third-party information about remote seller transactions will be developed in the future giving renewed credence to an old DOR slogan "Find Us Before We Find You."

Since 2002, Massachusetts taxpayers have had a line on the state income tax return to report use tax on items they may have purchased from out-of-state, online, mail or phone order sellers who did not collect sales taxes.

If you couldn't be bothered tracking down receipts on your purchases, DOR has created a "safe harbor" amount of use tax you can report that's based on your Massachusetts adjusted gross income. DOR's online filing system, WebFile for Income, will even calculate it for you (as will most tax preparation software).  That means no matter how many purchases you made (under $1,000 per item), DOR can't assess you more after an audit than the amount of use tax you paid under the safe harbor schedule. For example, if your adjusted gross income was between $40,001 and $60,000 you would pay $31 to satisfy your use tax liability for the year.

Not a lot to pay for peace of mind.

DOR’s Advisory Council Ready to Begin Work

As part of Commissioner Pitter’s DOR360 initiative, the department formed the DOR Advisory Council last year to provide advice and input on agency activities and policies.

After an initial introductory meeting, the Council is ready to begin tackling its important issues; the Commissioner has asked the Council to provide input on three areas:

1. Audit Practices and Dispute Resolution -- including audit standards, the audit process and the appeals process.
2. Communications and Customer Service-- including customer satisfaction monitoring, leveraging partnerships for better outreach and education, content management, information mapping and the best channel strategy.
3. Innovation, Transparency and Change-- to answer questions including: What do stakeholders want to see? What is the right level and format for consultation on guidance and technical and administrative changes?

Council members, together with DOR staff, will be engaging in discussions and dive into these issues to ferret out the right questions and arrive at some recommendations. The Council subgroups will be meeting over the next couple of weeks and will report on their progress at the second Advisory Council meeting on May 2 where the discussions will be opened up to the entire Council for discussion.

Stay tuned for Council meeting results!

DOR Reminder-Business entities must certify tax status by April 1 to be listed in Corporations Book

    DOR now requires all business entities to certify their tax status through an online application on WebFile for Business located at Corporations Book Application by April 1, 2013.  The annual Corporations Book is used by local assessors to determine which businesses qualify for various property tax exemptions afforded entities that are classified as corporations for federal and state tax purposes.  

    Recent Corporations Books have been subject to inaccuracies in part because of changes in state tax laws. In order to get updated and accurate information, DOR is compiling the 2013 listing utilizing information that business entities report in the online application.

    A corporation that does not complete the online application by April 1st may be omitted from the Corporations Book and may not receive personal property tax exemptions to which it would otherwise be entitled.

    If you have never used WebFile for Business, you will need to register your business to access the application for certification. Please note that it can take several days to confirm registration for WebFile for Business. For details see Directive 12-5 or FAQ's

DLS and DOER Partner to Shine Light on Solar Assessment

Nearly 300 public and private sector attendees participated in three workshops last week to learn about valuation of solar photovoltaic (PV) projects for the purpose of taxation or for negotiating a payment in lieu of taxes (PILOT) agreement.

Sponsored jointly by DOR’s Division of Local Services and the Department of Energy Resources (DOER), the workshops drew local assessors as well as a smattering of individuals who work in the development of PV projects.

The nearly four-hour workshops, led by George E. Sansoucy, P.E., and Glenn Walker, were held in Boston and Worcester on Feb. 26 and in Springfield on Feb. 27. Sansoucy’s engineering and appraisal firm specializes in the valuation and financial feasibility of special purpose properties and consults on regulatory matters.

The workshops were organized by the DLS Bureau of Local Assessment and were funded with a grant from DOER.

Massachusetts has seen an explosion in PV development driven largely by government regulations requiring utilities in states that have adopted solar carve-outs to supply a portion of their electricity from solar systems.

Sansoucy frankly admitted that these 21st Century means of electrical generation have outstripped the 20th Century law used to value conventional sources of power generation, and noted there are currently nine bills filed in the state legislature that deal with the valuation of PV projects.

The workshop materials presented were in draft, and are now open for comment from those who attended. DLS will publish a final copy of Sansoucy’s presentation on its website after comments are received and incorporated. Media coverage of the event can be found here.

New Business Expenses Video and Info Page Posted

Many employees have business expenses, but have questions about what's allowable and what type of documentation is needed. To help with that, DOR has created a short video and an Employee Business Expenses page that lists the top reasons contributing to the disallowance of an employee business expense, along with our Audit Division’s recommendations for how to avoid possible errors. Take a look before you, or your practitioner file.

Here's a few samples from the page:

1)  Lack of documentation to support an expense

• Receipts
• Business purpose of expense
• Ballpark estimates

Solution: Retain all business related receipts.  Ideally, the receipts should be retained in chronological order.   Maintain a calendar to record business purpose/contact/time/location of the business meeting.

2)  Incomplete or insufficient travel log.  

Solution: Maintain a real time daily travel log that includes necessary information including, address of location, mileage and business purpose/contact of the trip.

3)  Failure to respond to a DOR Notice.

Solution: Respond to the notice if you believe you are entitled to the deduction.

 

See the video on DOR's homepage -- and the Audit recommendations 

DOR Hosts Legislative Outreach Event

As part of Commissioner Amy Pitter’s DOR360 initiative, DOR hosted a Legislative Outreach Day event on Thursday, February 28 in the State House–inviting Legislators and their staffs to meet with a variety of DOR managers  to ask questions, discuss policies and learn more about the services DOR offers to our legislative stakeholders.

Commissioner Pitter and senior staff from Child Support, Legal, Tax and Policy Analysis, the Problem Resolution Office and Local Services were on-hand for the open house forum.

During the event, well over 100 people were in attendance.   The Commissioner  opened with a few welcome remarks and summarized the services offered by DOR – particularly when dealing with constituent issues – and introduced DOR staff.

Response was terrific – with many legislators and staff thanking Commissioner Pitter and mentioning that the event was very helpful in getting information – and also for putting faces to people they had spoken to but had not met. 

Be sure to check out photos from the event!

Relief for MA Fishermen and Farmers

Because of the delay in revising and printing federal tax forms that fishermen and farmers use to pay their yearly estimated tax due by January 15, the IRS will waive any underpayment penalty as long as they file and pay their taxes by April 15, 2013. MA DOR is following the IRS and will not penalize fishermen and farmers who file and pay by April 16, 2013.

The exception to the state penalty is explained on Form M-2210. If you qualify for this exception, be sure to enclose Form M-2210 with your tax return.  For more information, see IRS Notice 2013-5.

Additional Senior Circuit Breaker Session Announced - More to Come

The response has been very exciting for our circuit breaker credit information sessions for seniors!  We've been asked to expand these sessions into Central and Western Mass -- which we are looking to do. Here's the first Central Mass information session... we hope to see you there...  Stay tuned for more!

February 27, 10:00 a.m.

Webster COA, 116 School St.

508-949-3845

Upcoming DOR Senior Circuit Breaker Info Sessions

DOR has had a great turnout for our early series of information sessions for seniors. These sessions are short presentations to educate taxpayers 65 and older about the benefits of the Senior Circuit Breaker Tax Credit.

For tax year 2012, the credit is worth as much as $1,000 for eligible taxpayers 65 and older who either own or rent their home. The credit is refundable, meaning that if a taxpayer does not have an offsetting state tax liability, or has a liability that is smaller than the credit, they receive a check from the Commonwealth for either the entire credit or for the portion left after taxes are paid.

Seniors who live in public or subsidized housing are not eligible for the credit.

 We hope to see you there!

Date/Time	Location/Address	Phone
February 20, 10:30 a.m.	Concord COA,  CANCELLED	978-318-3020
February 20, 12:30 p.m.	Acton COA, 50 Audubon Dr.	978-929-6652
February 21, 10:30 a.m.	Merrimac COA, 100 East Main St.	978-346-9549
February 21, 12:30 p.m.	Ipswich COA, 25 Green St.	978-356-6650
February 25, 10:00 a.m.	Natick COA, 117 East Central St.	508-647-6540
February 25, 11:30 a.m.	Needham COA 83 Pickering St.	781-455-7555
February 25, 1:00 p.m.	Wellesley COA, 219 Washington St.	781-235-3961
February 27, 1:00 p.m.	Wayland COA, 41 Cochituate Rd.	508-358-2990
March 6, 10:00 a.m.	Attleboro COA, 25 South Main St.	774-203-1906
March 6, 1:00 p.m.	N. Attleboro COA, 204 Elm St.	508-699-0131
March 7, 1:00 p.m.	Waltham COA, 488 Main St.	781-899-7228
March 13, 11:00 a.m.	Norfolk COA, 28 Medway Branch Rd.	508-528-4430
March 13, 12:30 p.m.	Wrentham COA, 400 Taunton St.	508-384-5425
March 13, 2:00 p.m.	Franklin COA, 10 Daniel McCahill St.	508-520-4945