New law will require about 6,000 businesses to speed up when they submit sales taxes to the state

Retailers group lobbied for flexibility but was ultimately unsuccessful

Jon Hurst, president of the Retailers Association of Massachusetts, is fuming over a new state law that he says will add to his members' headaches and paperwork.Nancy Lane/Pool/file

The head of the state’s retail trade group is fuming now that Governor Charlie Baker has signed into law a change that will cause thousands of Massachusetts businesses to speed up when they deliver sales taxes to the state.

The Retailers Association of Massachusetts had lobbied for the past several weeks to make the burden easier on its members — to no avail.

“To roll this out in the middle of COVID when so many of these businesses are on the edge . . . it’s incredibly bad public policy and even worse politics,” said Jon Hurst, the group’s president. “We will be the only state in the entire country to do this kind of scheme.”

Baker has, in the past, proposed accelerating when sales and meals taxes come to the state coffers. The one-time boost proved too good for the Legislature to pass up this time in the midst of the COVID-19 pandemic: $267 million in the current fiscal year, essentially drawn from what would have been sent over in the next fiscal year. State officials say the shift would affect about 6,000 businesses when it takes effect on April 1.

Hurst said he expects widespread anger next spring among affected businesses. Retailers typically don’t have to settle up with the state until three weeks after a month of sales is over. But the state budget that Baker signed on Friday includes language that will require sales taxes from the first three weeks of the month to be delivered to the state during the final week of that month. Hurst said few of his members are prepared to deal with this accounting headache.

Hurst did score one victory, though, in this year’s budget debate: The Legislature declined to adopt language Baker had proposed that would have eventually required daily sales tax remittance. However, Hurst worries that the shift that was approved is a precursor to daily remittance.

Baker reintroduced the concept of accelerating sales tax remittances in October, this time partly as a way to raise money to help small businesses suffering from the pandemic. Baker proposed using nearly $100 million for financial and technical help for small businesses. The Legislature halved this request in the budget that he ended up signing. So Baker proposed a supplemental budget on Friday, essentially to secure the other half.

The association fought the concept of accelerated sales tax collections outright for years, declaring it an accounting gimmick that causes more trouble than it’s worth. But Hurst’s group changed its tactics in recent months.

The association recently suggested to lawmakers that they only apply the change to businesses that submit more than $1 million in sales taxes each year, so only the largest retailers would be affected. Legislators ended up approving a much smaller exemption: those that remit $150,000 or less in sales taxes or lodging taxes in a 12-month period.

The retailers’ group also made the case that if state officials impose this new burden on merchants and restaurateurs, they should at least be allowed to submit estimated prepayments based on sales for the same month in the prior year. That would be much simpler to accomplish than keeping track of sales taxes in near-real time, Hurst said.

The association unsuccessfully lobbied legislative leaders this fall to add this option, which Hurst said resembles the way other states handle accelerated sales tax remittances. Then, in the past week, Hurst said the group pressed the Baker administration to send this section back to the Legislature with an amendment, to give retailers this alternative.

The Baker administration declined Hurst’s request, and Baker signed the legislation. A spokesman said the legislation does not give the Department of Revenue the authority to allow merchants to submit prepayments based on estimates from the prior year’s sales.

Bob Luz, the chief executive of the Massachusetts Restaurant Association, also expressed frustration with the additional paperwork burden.

“The owner is the host, hostess, they’re the server, the cook, and now they’re going to have to be the accountant,” Luz said. “You’re putting more administrative responsibilities on them [when] you could find a far easier way of doing it.”

The Baker administration points to the exemption for businesses with $150,000 or fewer in sales tax remittances. For retailers, that translates to those with less than $2.4 million a year in taxable sales. Hotels with more than $150,000 in room occupancy taxes in one year would also need to speed up their remittances.

Since March, businesses that are below those thresholds have been able to defer when they submit sales, meals, and room taxes to the state. That deferral ends in May.

When a spokesman for Baker’s budget office was asked why the administration didn’t try to amend this measure to provide the flexibility for estimating based on the previous year’s sales, he responded by pointing to a section of the governor’s news release about the budget.

That statement read, in part, that the new budget “modernizes the timeline for sales tax remittance and collection, which has not been significantly updated in decades.” The administration also added this statement, although most of the affected businesses are still considered small businesses: “These reforms will not impact consumers or nearly 95% of Massachusetts businesses, and are focused on the largest companies in the Commonwealth.”