Commonwealth Conversations: Revenue

DOR rules that businesses may claim sales tax exemption for equipment used in construction of solar energy systems

In a letter ruling issued June 22, DOR has ruled that the sale of solar energy equipment "used directly and exclusively in the furnishing of gas, water, steam or electricity when delivered to consumers through mains, lines or pipes" is exempt from sales tax.

The ruling is quite similar to one issued about a year ago, when DOR made a similar letter ruling in the case of equipment used to generate electricity through wind power (DOR also blogged on the wind energy ruling.)

Both letter rulings make it clear that purchases of other equipment used in the construction of wind energy or solar systems that do not become "a part of the integrated and synchronized system that furnishes the electricity to consumers are not exempt under this clause of Chapter 64H Section 6(s) ."

Both these rulings extend the sales tax exemption only to businesses engaged in the generation of electricity.

Tornado taxes assessors -- local officials rise to challenge

What happens when a natural disaster wipes out or damages hundreds of homes and causes the loss of millions of dollars of property value off the tax roll of a community?

The Divsion of Local Services weekly online publication City and Town has a particularly compelling account this week outlining the scope of the property damage done by the tornado that hit Hampden County on June 1, and the response of local assessors to the challenge of fixing values on properties that no longer exist in the condition under which they were assessed.

Written by Sandra Bruso, who works in the DLS Bureau of Local Assessment in Springfield covering "her towns" as she calls them -- and who from previous experience has firsthand knowledge of some of the towns ripped apart -- and with dramatic photos provided by Kirsten Shirer, who works for DLS information technology in Springfield, the piece provides a community-by-community snapshot of devastation the tornado caused as it rode roughshod over urban, suburban and rural areas in Hampden County roughly parallel to the state line with Connecticut to the south.

As Ms. Bruso concludes, the recovery process in these communities, as well as the neighboring Hampden County community of Brimfield, and Sturbridge and Southbridge in Worcester County, is going to take some time.

WebFile crash causes headaches for taxpayers and DOR

Technology is a wonderful thing -- when it works. But when taxpayers depend on technology to pay their taxes, and that technology goes down leaving no other readily available payment option, it's time to scramble.

That was the situation taxpayers and DOR faced earlier this week when DOR's WebFile for Business and WebFile for Income web-based tax reporting and payment systems crashed on Sunday, June 12. The cause -- a maintenance patch that unexpectedly gave the WebFile systems the equivalent of a strong allergic reaction, shutting them down.

The systems were not brought back up until Tuesday evening as the deadline for filing a variety of tax types loomed little more than 24 hours later at midnight Wednesday, June 15th.

DOR IT staff working to restore the system also attempted to retrieve an estimated 400 returns and payments that came in before the system crashed, but did not exit in time to be processed. Taxpayers whose returns could not be processed are being notified by email or phone of the need to refile.

Tuesday, June 14th, was also the day DOR announced that due to the outage, any tax return and payment filed with the WebFile systems would be treated as timely filed if received by midnight Friday, June 17th. An announcement to that effect was placed on DOR's homepage shortly after 9 p.m. Tuesday night as WebFile service was restored.

The timing of this crash could hardly have been worse. June 15th is a filing and payment deadline for income tax and corporate tax estimated payments, which generate millions of revenue dollars. The crash also jeopardized timely payment of weekly and monthly withholding taxes. While not all taxpayers use the WebFile systems, thousands do, and many of them called DOR seeking information and assurance that they would not be hit with late file penalties if they missed the June 15th deadline.

DOR sincerely regrets the inconvenience and agita this outage caused taxpayers. To beef up the WebFile systems, DOR will take them down over the weekend, after the filing deadline has passed, to do additional maintenance.

 

DOR meeting with tax practitioners in Holyoke on June 23

DOR's Office of the Taxpayer Advocate and Problem Resolution Office will meet with tax practitioners from 12:30 p.m. to 1:30 p.m. on Thursday, June 23, at Holyoke Community College in the Kittridge Center, Room 303. Parking is in the D lot.

No registration is required, but those who plan to attend are asked to send an email to taxadvocate@dor.state.ma.us.

The Holyoke meeting with practitioners is the first in a monthly series that will continue around the state through the fall. DOR will post notice when the schedule is set.

While DOR representatives will make a brief presentation, the real point of the session is to hear tax practitioners discuss ways they believe DOR can work more effectively and efficiently. "We want to find out how we can assist practitioners," said Taxpayer Advocate Dennis Buckley.

A similar session held in Boston last year has resulted in DOR exploring the establishment of a central file to record receipt of power of attorney notices. Practitioners explained that POA's mailed to individual workers in DOR must be re-sent if another worker gets involved in a tax case, which happens frequently.

DOR officials will speak briefly about the process for filing abatements and appeals.

Notice of this meeting, and future meetings, was sent via a list serve from DOR's Rules and Regulations unit. To sign up to receive DOR legal communications click here.

 

DOR schedules series of Small Business Workshops

 

 

Posted by:

Robert Bliss, Director of Communication, Department of Revenue

 

The Department of Revenue has scheduled six Small Business Workshops to assist new business owners in understanding business income, sales and use, and payroll taxes. These workshops offer soup to nuts explanations of the tax laws and issues that small business owners encounter, and provide a chance to ask questions of a knowledgeable DOR representative.

The presentations include instruction on how to use DOR’s web-based WebFile for Business application, which allows small business owners to register, file and pay taxes online. Attendees will learn of the different types of business ownership and the tax requirements of each one as well as the difference between and taxable and exempt sales and services.

These workshops are free and open to the public. Registration is required. Questions are encouraged and participants will gain useful knowledge from Brian Lynch of DOR’s Education and Training Division, who conducts the workshop, as well as from the questions and the experiences of new business owners in attendance.

The schedule:

* June 14^th, Braintree Town Hall, 1 JFK Memorial Drive, 8 a.m. to 10 a.m.

* July 28^th, Cambridge Economic Development, 344 Broadway, 10a.m to noon

* Aug. 10^th, Worcester Public Library, 3 Salem Sq., 10 a.m. to noon

* Sept. 22nd, Beverly Public Library, 32 Essex St., 10 a.m. to noon

* Oct. 6^th, Quincy Public Library, 40 Washington St., 10 a.m. to noon

* Oct 27^th, Cambridge Economic Development, 344 Broadway, 10 a.m. to noon

 

 

Tax identity theft soaring nationally

The Government Accountability Office (GAO) in Washington D.C. has reported  that the federal Internal Revenue Service has seen nearly a five-fold increase in taxpayer identity theft between 2008 and 2010.

In its news account of the GAO report, the Associated Press reported that there were 248,357 incidents in 2010, compared to 51,702 in 2008.

Massachusetts DOR has seen a relatively small number of known identity theft cases in tax year 2010, and has posted on its website advice and guidance  on how to deal with tax identity theft should it occur.

As the AP reported, typically, tax identity thieves submit tax returns for refunds early in the filing season. The legitimate taxpayer whose identity has been stolen usually files later, and only then learns from the tax agency that a return has already been filed using the same Social Security number.

The IRS has established a website, www.STOPFRAUD.gov, which instructs taxpayers on what to do if they suspect identity fraud.

This story from Reuters also explains why the difficulty tax agencies have in preventing identity theft.

 

May revenues of $1.506 billion are under benchmark and less than last year

The Department of Revenue today released revenue numbers for May. The monthly collection of $1.506 billion was $56 million below benchmark and $68 million less than a year ago.

This was the kind of month that proves the old adage, what goes up must come down. Given that April revenue was $587 million over benchmark, it was hardly shocking to see May revenue take a bit of a tumble.

As Commissioner Navjeet K. Bal pointed out, return processing in April was exceptionally speedy, leaving fewer envelopes to open and fewer checks to deposit in May. In addition, it turned out that some of the withholding income that DOR expected to collect in May came in during April. 

If you look at filing season as a two-month proposition covering April and May, which is good way to look at it since those are the months in which income tax collections are received and counted, the Commonwealth finished more than $500 million above the combined monthly benchmarks.

Year to date, the Commonwealth has collected $1.859 billion more than a year ago. That is a clear sign of economic -- and tax collection -- recovery.

Other states, while not seeing increases as dramatic as that seen in Massachusetts, are recording a rise in revenue. The National Governors Association reported this week that a revenue recovery is underway, but that most states still have a ways to go to reach the level of revenue collected in 2008.

That holds true for Massachusetts as well, since this year's collection (currently $18.366 billion) will fall short of the FT2008 collection of $20.888 billion with just one month to go before the end of FY11. June is historically a large month for collections due to receipt of estimated payments, but it would have to be a monster for FY11to top the FY2008 collection.