We welcome guest blogger Marc Grossman of Crowe Horwath who practices primarily in multi-state tax and unclaimed property.
Beginning April 1, 2016 and through May 31, 2016, the Commonwealth is introducing an amnesty program to assist taxpayers (both filers and non-filers) remedy potential Commonwealth tax obligations – including Massachusetts sales and use tax. Massachusetts, like many states, also offers an informal Voluntary Disclosure Agreement (“VDA”) Program to assist taxpayers, who are non-filers, remedy their sales and use tax liabilities. Taxpayers are encouraged to examine the pros and cons of each of these two programs in deciding which program is most beneficial with respect to their situation.
The Massachusetts Amnesty Program
The current Program begins April 1, 2016 and commences until May 31, 2016 and encompasses not just Massachusetts sales and use taxes, but also most taxes administered by the Department of Revenue except taxes paid by registered motor carriers reporting fuels tax under the International Fuels Tax Agreement (IFTA) and preferred provider excise paid under chapter 176I of the Massachusetts General Laws. Moreover, the review period, commonly referred to as the lookback period, is generally from January 1, 2013 through the present for both non-filers and filers. Upon successful completion of the Amnesty program and payment of the requisite tax and interest, penalties are abated. However, what is arguably the biggest benefit is that taxpayers who have received a state tax notice and/or are currently under audit can participate in the amnesty program. Please note that amnesty does not cover existing tax liabilities already billed by the Department of Revenue. Moreover, amnesty is not available for taxpayers who have committed malfeasance (i.e. filing a fraudulent return, subject to a criminal tax investigation, etc.)
The Massachusetts Voluntary Disclosure Agreement Program
While the amnesty program is available to taxpayers 1) who have received a sales tax notice; 2) who are under audit; or 3) who are currently registered and filing Massachusetts sales and use tax returns, the VDA Program is available to taxpayers who are non-filers, have not been contacted by the Commonwealth, have not collected tax, and are not under audit to remedy potential sales and use tax liabilities. Upon effectuating an Agreement with the Commonwealth, taxpayers submit the requisite sales and use tax schedules and remit the corresponding tax and interest for the prior three years; with the Commonwealth abating penalties. Thus, a VDA application submitted today on April 1, 2016, would require payment of Commonwealth sales and use taxes for the period April 2013 through the present.
Taxpayers with a potential sales and use tax liability who are under audit, who have received a notice from the Commonwealth, or are filers should consider the potential benefits of participating in the Commonwealth’s current amnesty program. Taxpayers, who are non-filers, who are not currently under audit, and who have not a received a notice, might consider the potential benefits of participating in the Commonwealth’s VDA program.
Watch this space for more information on a Southeastern state’s amnesty program expected to be announced later this year.