What does the $500 million tax bill approved by the Legislature last week mean for employers?

1. Gas Tax:  Includes a 3 cent per gallon increase in the gas tax.  The current rate is 21 cents per gallon and the new tax will be 24 cents per gallon.  The gas tax is also indexed to inflation, and automatic increases to the gas tax will become effective on January 1, 2015.  See the Department of Revenue’s guidance on this new tax.
2. Cigarette Tax:  For retailers, the cost of pack of cigarettes will increase by $1.  Businesses selling tobacco products should consult the Department of Revenues guidance on the impact tax rates for all tobacco products.
3. Sales and use tax on computer and software services:  This new tax was originally proposed by Governor Patrick in January and was altered by the House and Senate to exclude “the cloud” and “data processing.”  AIM urged the legislature to focus on transportation-related taxes and revenues rather than implementing new business taxes.  Employers that purchase or offer computer and software services should review the recently released Department of Revenue interim guidance on this new tax.  The effective date for collection of the tax is July 31, 2013 and the DOR’s interim guidance provides additional information regarding the transition period. Feedback needed:  AIM is seeking your feedback on the DOR’s interim guidance to share with the department.  To learn more read:  TIR 13-10: Sales and Use Tax on Computer and Software Services Law Changes Effective July 31, 2013).  In the near future, the DOR will also publish a working draft of regulations impacting the implementation and applicability of the new tax.  The working draft is not yet available, but you can click here to read the current regulation 830 CMR 64H1.3. AIM member feedback on this document will also shape AIM’s comments to the DOR during the future public comment period.Feedback needed:  AIM is seeking your feedback on the DOR’s interim guidance to share with the department.  To learn more read:  TIR 13-10: Sales and Use Tax on Computer and Software Services Law Changes Effective July 31, 2013).  In the near future, the DOR will also publish a working draft of regulations impacting the implementation and applicability of the new tax.  The working draft is not yet available, but you can click here to read the current regulation 830 CMR 64H1.3. AIM member feedback on this document will also shape AIM’s comments to the DOR during the future public comment period.

4. Tax Regime Change from “cost of performance” to “market sourcing”:  The final bill impacts corporate excise taxes by altering how Massachusetts sources sales, other than sales of tangible personal property, to the Bay State for sales factor purposes if a corporation’s “market” for the sale is in Massachusetts.
5. Utility Corporation Tax Change:  The final bill eliminates the classification for utilities.  Those levies would represent a tax increase on companies that deliver electricity, gas, water and telephone services.
6. FAS 109 Deduction:  The FY14 Budget included a third delay in this deduction by publically traded companies that file combined reports.
7. Brownfields Tax Credit:  The FY14 budget also included an extension of the brownfields tax credit to 2018.
8. DOR Administrative Tax Changes: Included in the FY14 budget were several DOR tax administrative changes impacting electronic records, pass-through entity, and a federal offset program.

To learn more about these issues or to learn more about AIM’s Taxation Committee and the tax issues AIM members get involved with, please contact Brad MacDougall, Vice President of Government Affairs at 617-262-1180 or bmacdougall@aimnet.org.