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Massachusetts Use Tax?

The next time you decide to drive to NH to make a large purchase to avoid the sales tax, you might want to think again.

How many of you answer question #33 on your Massachusetts FORM 1, PAGE 3, which asks you to report “Use tax due on out-of-state purchases?"

Well, as you may have guessed, this is where Massachusetts seeks to collect taxes on all of our out of state purchases, including online purchases.

Yes, you are correct. If Massachusetts is not collecting sales tax then they expect us to report and pay a “use” tax on any out of state purchases that would be subject to Massachusetts sales tax.

For all of the consumers out there that make large purchases in New Hampshire or other states to avoid the Massachusetts sales tax, BEWARE. As of now, it is based on the honor system. However, technology is making this process easier and easier to audit.

How difficult do you think it is for the Mass DOR to ask NH retailers to submit a list of all purchases made by consumers with a Massachusetts address? How often do you think the Mass DOR is auditing retail businesses that border Massachusetts? 

The next time you decide to drive to NH to make a large purchase to avoid the sales tax, you might want to think again.

Is it worth the interest and penalties you would pay if you get caught? Or, ask yourself: Do we have a responsibility to do our part for the Massachusetts economy? 

For more information on this topic and others, email info@abbottandcompany.net or visit www.mass.gov/dor

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Alan Seferian February 28, 2012 at 06:33 PM
Hi Melinda: Please refer to the Town Fair Tire case, http://www.sandw.com/news-399.html As a result of this case, the NH legislature passed a law shielding their retailers from the inquiries of out of state revenue departments. Please note I am by no means condoning tax fraud. I agree we should support our community by patronizing local merchants. Best, Alan
Patrick Ball (Editor) February 28, 2012 at 07:51 PM
Hi Alan, Thanks for reading and sharing that information. And also for weighing with your thoughts on patronizing local merchants as a means of supporting the community. Best, Patrick
Mellinda Abbott February 29, 2012 at 01:04 AM
Thank you Alan. I appreciate your feedback. The article was very interesting.
Steven Iverson February 29, 2012 at 03:11 PM
"How difficult do you think it is for the Mass DOR to ask NH retailers to submit a list of all purchases made by consumers with a Massachusetts address?" Asking would be easy. I don't know why they'd have to comply, though. "How often do you think the Mass DOR is auditing retail businesses that border Massachusetts?" I'd be surprised if the DOR has the authority to force an audit of a business in NH or another border state. Couldn't the businesses just say no? If, as a CPA, you know the answers to the questions you posed, then please share the information with us so we're all better informed. Thanks.
Mellinda Abbott February 29, 2012 at 03:33 PM
Hi Steven, You raise some interesting questions. I wish I had the answers. In 1998, I had a client(Cabinet Maker in Nashua)who was audited by the Mass DOR and all of his Massachusetts customers were sent bills from the Mass DOR in collection of the use tax. In a previous post, Alan, provided a link to the following article http://www.sandw.com/news-399.html. Perhaps, this would answer some of your questions. It could be that as a result of this case, the Mass DOR is trying to recoup some of this tax revenue with question #33 on the Mass Form 1. What would be the ramifications if this question was not answered truthfully? Thank you for your post.
Steven Iverson February 29, 2012 at 07:16 PM
Thanks for your reply. I did take a look at Alan's page of links, and they're helpful. I'm still surprised that the MA DOR can force an out-of-state business to submit to an audit. Maybe they can say that refusing the audit will lead to a ban on the company doing business in MA? Wondering what other leverage they might have . . . Either way, I agree with Alan and you that lying to the state of MA about what you owe is a bad idea.
Adam February 29, 2012 at 07:19 PM
There is a minimum "safe harbor" amount you can pay which covers your liability for use tax on all items that you purchased during the year that were under $1000, even if you technically owe more than the safe harbor amount. Items over $1000 aren't covered by the safe harbor, so you have to pay the actual amount of use tax owed for those items. More info from the Massachusetts DOR: http://www.mass.gov/dor/individuals/filing-and-payment-information/guide-to-personal-income-tax/forms-schedules-and-worksheets/worksheet-examples/use-tax-due-on-out-of-state-purchases.html

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